China 10-Year Yield Falls to Lowest in 18 Months on Easing Bets

(Bloomberg) -- The yield on China’s 10-year sovereign bonds declined to the lowest level since June 2020, as interbank borrowing costs fell after the central bank boosted short-term liquidity.

China’s 10-year government bond yield fell two basis points to 2.795% as of 4:40 p.m. in Shanghai. On Tuesday morning, The People’s Bank of China boosted its injection of short-term liquidity into the financial system to 190 billion yuan ($29.8 billion), the most in two months. The operation pushed an indicator for interbank rates lower, after it soared the most in a year in the previous session.

The government yields have been trending down since mid-December in the wake of a reserve-requirement ratio cut by the PBOC and a marginal reduction in the loan prime rate earlier this month. Further easing measures are expected in the near term, according to analysts, with the economy showing strain from a property slump, weak private consumption and sporadic virus outbreaks.

“There is more room for bond yields to decline in the weeks ahead,” said Mitul Kotecha, chief emerging markets Asia & Europe strategist at TD Securities in Singapore. “Markets are expecting this to be followed up into next year with more liquidity provision, and lower interbank rates feeding into positive sentiment for bonds.”

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