China 10Y Yield Nears 8-Week Low
China’s 10-year government bond yield traded below 1.8% on Tuesday, nearing its lowest level in eight weeks, after Chinese regulators urged banks to curb excessive exposure to US Treasuries. Financial institutions were advised to rein in Treasury holdings and trim positions where exposure is high, citing concentration risk and market volatility. Still, the move was framed as market risk diversification rather than a geopolitical signal or a loss of confidence in US credit. The shift reinforces broader diversification away from dollar-denominated assets and could accelerate capital repatriation into Chinese markets, putting yields under pressure. Meanwhile, the People’s Bank of China has been ramping up liquidity injections ahead of the Lunar New Year to cover a large temporary funding shortfall amid cash withdrawals linked to holiday spending. By supplying banks with extra cash, demand for government bonds rises, weighing further on yields.
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