China 10-year bond yield hits record low

Cheap funding in the interbank market is helping fuel the bid for bonds. Overnight repo rates have hovered near a six-month low, while the People’s Bank of China’s shift to an overnight policy rate and its net bond purchases in October have reinforced expectations that policy will stay accommodative.

The demand is also being driven by a lack of attractive alternatives. With domestic demand still subdued and high-quality assets in short supply, banks and wealth managers have kept adding government bonds, while some hedge funds have joined the trade as equity volatility rises.

A股市场’s latest pullback is adding to that flow. Authorities’ renewed efforts to steady stocks have yet to fully restore confidence, and fading enthusiasm for technology and artificial intelligence shares is pushing some money into fixed income instead.

The rally is not without risk. The 30-day historical volatility of the 10-year bond has climbed to its highest since April, suggesting the market is getting more sensitive to any signal that regulators want to slow the drop in long-term yields.

For investors, the key question is whether Beijing will tolerate further bond strength or step in with a clearer message. If growth remains weak and liquidity stays abundant, the move lower in yields could continue; if policymakers push back, the crowded long-bond trade may face a sharp reversal.