China's 10-year government bond yield remained around 1.8% on Monday, maintaining its recent downtrend and hovering close to six-week lows. This comes as investors digest China's latest Purchasing Managers' Index (PMI) figures. A private survey indicated accelerated factory growth in January, as manufacturers increased output and expedited shipments ahead of the extended Lunar New Year holiday, thereby moderating expectations for imminent policy easing. Conversely, an official survey conducted over the weekend revealed an unexpected downturn in both manufacturing and services sectors.
Despite this, demand for local government bonds continued to be strong. Banks have been increasingly purchasing these bonds, bolstered by unprecedented liquidity injections from the People's Bank of China and a decline in loan demand. This adjustment reflects Beijing's efforts to temper the recent surge in equity markets, encouraging investors to opt for the relative security of government bonds. Recent regulatory amendments have further fueled this trend, as authorities relaxed interest-rate risk measures earlier this year to bring them in line with global standards.