China Government Bond 30Y

The People's Bank of China has conducted a survey of mutual funds regarding their long-term bond investments, according to people familiar with the matter. The central bank mainly examined 10-year and 30-year bonds, and also looked into duration mismatch risks in mutual funds' assets under management, the people said. Another source said the PBOC also asked about recent market volatility and how fund managers view appropriate yield levels for long-term bonds. Long-term bond prices have risen over the past month, with the 10-year yield hitting its lowest level since July 2025 this week. On the 20th, the 10-year yield stood at 1.68% and the 30-year yield at 2.13%, both the lowest since September 2025, while the spread between 1-year and 10-year yields narrowed to 48 basis points.

China's long-dated government bond yields have kept falling, bucking a global bond selloff that has pushed yields elsewhere to multi-year highs. The 30-year yield dropped to its lowest since November last year, narrowing the spread between 10-year and 30-year bonds to 50 basis points, near the tightest since February this year. Open interest in 30-year bond futures hit a record high on Friday, reflecting heavy speculation that Chinese yields will fall further. Analysts at Zhongtai Securities view the narrower 10-30 year spread as offering the best risk-reward balance for the rest of this year and expect the 30-year yield to fall to 2%. Weak Chinese economic data for July, with industrial output, retail sales and investment all missing expectations, has reinforced bets that Beijing will ease policy further. Investors have piled into longer-dated bonds, reflecting a view that China's economy may face a prolonged slowdown, in contrast with many countries where interest rates remain high. The 10-year US Treasury yield hit its highest since 2025 this week, while long-dated bonds globally have come under selling pressure. Analysts at Shanze Fund explained that the recent bond rally has been driven mainly by short-term trading books rather than long-term investment portfolios. If the market expects further monetary easing in China and liquidity remains loose, the spread between 10-year and 30-year yields could narrow toward 40 basis points. Chinese government bonds have returned 2.6% since the start of the year excluding currency effects, putting China third among major bond markets. The 30-year yield held at 2.15% on Wednesday, near the nine-month low reached the previous day. Demand for bonds remains strong, with a 20-year special government bond auction today drawing a record bid-to-cover ratio.