China 10Y Yield Approaches 2025 Low

China’s 10-year government bond yield fell to around 1.67% on Wednesday, nearing its lowest level since mid-June 2025, as banks increasingly turned to government debt to boost returns amid weak demand for mortgages and consumer loans. Claims on the government rose to 16.4% of lenders’ total assets in July from 11.5% five years earlier, while claims on residents fell to 16.4% from 20.3%. The shift marked the first-ever reversal between the two categories, highlighting Beijing’s struggle to revive credit demand following an unprecedented property downturn and a prolonged consumption slump. On the economic front, annual consumer inflation rose to 0.8% in August, matching market expectations and accelerating from a six-month low of 0.5% in July. Producer price inflation also picked up to 3.8% from 3.5%, surpassing expectations of 3.7%. The renewed price pressures were driven largely by higher energy costs amid ongoing tensions in the Middle East.

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