China’s 10-year government bond yield dropped to around 1.6%, a new record low, after the People’s Bank of China signaled a significant shift in its monetary policy to support the economy.
China’s bond yields drop as PBOC shifts policy
On Friday, the central bank announced it would focus on interest rate adjustments rather than quantitative targets for loan growth as part of a broader interest rate reform initiative described by government advisors as an "arduous task." In late September, China cut its primary rate, the seven-day reverse repo rate, from 1.7% to 1.5%, the lowest level since at least 2012, to stimulate economic activity.
PBOC plans rate cuts and RRR reductions for 2025
In mid-December, PBOC research director Wang Xin revealed plans for additional interest rate cuts and reserve requirement reductions in 2025, highlighting room to lower the reserve requirement ratio (RRR), currently at 6.6%, to inject more liquidity into the financial system.
