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Chinese government bonds continue to rise, with ultra-long-term treasury bond futures reaching their highest levels of the year. However, analysts are adopting a more cautious outlook for the future.
Yesterday, the main 30-year government bond contract closed up 0.4% at CNY114.18 (approximately USD16.73), after peaking at CNY114.37 during trading hours—the highest since the start of the year. The 10-year, five-year, and two-year bonds increased by 0.09%, 0.07%, and 0.04%, respectively, closing at CNY108.84, CNY106.27, and CNY102.60.
Many attribute these gains to easing monetary policy conditions. Experts suggest that liquidity will remain a significant factor influencing bond market trends moving forward.
The yield on the 30-year government bond, ’26 Interest-Bearing Treasury Bond 02,’ fell by 1.95 basis points to 2.2135% in after-hours trading as of 6 p.m. yesterday. Similarly, the 10-year bond ’26 Interest-Bearing Treasury Bond 05′ decreased by 1.2 basis points to 1.731%.
According to Liu Yu, a fixed-income analyst at Huaxi Securities, the persistent decline in short-term interest rates has further pushed down rates in the short end. Additionally, in an environment of ultra-loose monetary policy, non-bank institutions hold abundant funds, bolstering buying momentum in the bond market.
Despite overall optimism, some market participants are becoming more cautious. Zhang Jiqiang, a fixed-income analyst at Huatai Securities, recently advised gradually shifting toward a neutral stance, taking profits on 10-year treasury bonds, and avoiding overinvesting in long-term bonds.
Since early this month, bond prices have been trending downward, with the overnight interbank repurchase rate—DR001—remaining below 1.23%. It closed at 1.2181%, after dropping to a low of 1.1%.
The low rate is attributed to cash influx into the banking system following the Chinese New Year holiday, reduced liquidity demand at the start of the quarter, expanding foreign-exchange settlement and sales, and increased fiscal spending, explained Zhang Xu of Everbright Securities.
Zhang noted that, given the central bank’s regulation and other factors, the DR001 rate is expected to gradually rise, especially ahead of the upcoming Labour Day holiday when demand for base money typically increases.
The central bank’s policy decisions are driven primarily by domestic financing needs, and currently, there are no signs of tightening measures. Even if geopolitical tensions in the Strait of Hormuz ease, the impact on liquidity is unlikely to be significant, according to Sun Binbin of Caitong Securities. Additionally, the issuance of specialized treasury bonds is about to commence.
Forecasts indicate that funding interest rates will remain low and fluctuate within a narrow range. As a result, yields on 30-year and 10-year treasury bonds are expected to dip below 2.15% and 1.7%, respectively.
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