China’s long-end yields drop to lowest since mid-2025, driving aggressive curve flattening

China’s 10-year government bond yield slid to 1.67% on August 18, its lowest level since July 2025. That’s a 7-basis-point decline over the past month and 11 basis points lower than a year ago, reflecting a bond market that’s betting heavily on more stimulus from Beijing.

While China’s long-end yields keep sinking, the US 10-year Treasury is sitting around 4.72%. That’s a gap of roughly 305 basis points between the world’s two largest economies.

Weak data, strong signal

The catalyst for the latest leg down in Chinese yields was a July data dump that disappointed across the board. Industrial production, retail sales, and fixed-asset investment all came in below consensus expectations.

Growth estimates have now slipped beneath the government’s official target range of 4.5% to 5.0%. Premier Li Qiang made remarks that emphasized the need for enhanced policy support.

The People’s Bank of China followed up with action on August 15, injecting 349 billion yuan, roughly $51.7 billion, into the financial system through an overnight reverse repo operation.

The 30-year CGB yield was hovering around 2.15% on the same date, with the spread between 10-year and 2-year bonds compressed to approximately 44 basis points.

What’s next: the NPC session and beyond

All eyes are now on the National People’s Congress Standing Committee session scheduled for August 25-28. Market participants are pricing in the likelihood of additional fiscal or monetary support measures emerging from those meetings.

The spread between Chinese and US long-term rates also has currency implications. A 305-basis-point gap in favor of US yields puts persistent downward pressure on the yuan, which complicates the PBoC’s balancing act between supporting growth and maintaining currency stability.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.