FX.co ★ China 10Y Yield Falls on Stimulus Bets

China’s 10-year government bond yield fell to about 1.73% on Wednesday, its lowest level in more than two weeks, as investors raised their expectations for additional policy support to bolster economic growth. The economy expanded 4.3% year-on-year in the second quarter, the weakest pace since the fourth quarter of 2022 and below Beijing’s 2026 growth target range of 4.5%–5.0%.

Fixed-asset investment declined 5.7% in the first half of the year, a deeper contraction than both market forecasts and the drop recorded from January to May. The broader economic slowdown is expected to be a central topic at the upcoming Politburo meeting later this month, where policymakers may consider intensifying fiscal support, including faster public spending and increased infrastructure investment.

Even so, signs of resilience have emerged. Industrial production accelerated in June to a three-month high of 5.3%, retail sales unexpectedly returned to growth at 1.0%, and the urban unemployment rate eased to 5.0%, its lowest level in a year.