China’s 30-Year Bond In Focus
According to a Bloomberg report, the institution has established a long position in 30-year Chinese government bonds at a yield of 2.088%, targeting a yield of 1.80%, as noted by Citi analysts Wenhan Chen and Rohit Garg. On Monday, yields for this maturity were trading near 2.1%.
As per the report, this optimistic assessment reflects how China’s bond market is diverging from the broader global fixed-income decline, where elevated global inflation has driven yields higher across major developed economies.
While global central banks address persistent inflationary pressures, China’s subdued credit expansion and weak domestic consumption continue to constrain domestic yields.
Regarding debt issuance, Citi noted that China has already distributed approximately 90% of its intended 1.3 trillion yuan ($194 billion) in ultra-long special treasury bonds scheduled for 2026, with the balance expected to conclude in October.
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Citi also anticipates that conventional longer-maturity bond offerings will resume in the fourth quarter, though it projects these issuance levels will be substantially lower than the ultra-long special treasury bond volumes observed in preceding years.
10-Year Yields To Decline
Demand for extended-maturity bonds should receive additional support from Beijing’s recent 360 billion yuan recapitalisation initiative for major financial institutions, according to Citi.
The institution projects that China’s 10-year yields will gradually decline toward 1.60% as constrained credit demand limits upward yield pressure, while continuous central bank bond acquisitions furnish structural reinforcement for the debt market. The 10-year yield was approximately 1.67% on Monday.
Citi anticipates that the yield differential between 10- and 30-year securities, presently positioned at the elevated end of its three-year moving average, will narrow.