On February 9th, the yield on the 10-year Chinese government bond fell below the 1.8% mark, a level not seen since November 2025, touching a low of 1.793%. Since the beginning of January, the 10-year yield has declined by a cumulative 10 basis points from its recent highs. Recently, as the yield on the 30-year bond has accelerated its descent, the divergence between the two has weakened, leading to a narrowing of the yield spread between different maturities.
According to market participants, against a backdrop of high volatility in other asset classes, the bond market has recently experienced a sustained recovery. This is attributed to two main factors: firstly, the allocation value of bonds has become more prominent, strengthening institutional investors' willingness to hold bonds over the upcoming Spring Festival holiday. Secondly, the central bank has consistently signaled accommodative intentions, heating up market speculation about further monetary easing.
Entering the final trading week before the holiday, most institutions hold an optimistic view of the bond market's performance. The primary potential disruptions are now seen shifting towards fundamental economic data and the seesaw effect between stocks and bonds. Key economic indicators scheduled for release this week, such as inflation data, are a major focus for the market.
The bond market recovery has reached a critical level, with the yield spread narrowing. On the 9th, positive sentiment continued in the bond market, with yields on major interest rate bonds in the interbank market generally moving lower. The yield on the active 10-year bond, "25附息国债16", fell below 1.8%, settling around 1.79%, a move that captured market attention. At the close, government bond futures rose across the board.
In the cash bond market, the yield on "25附息国债16" decreased by 0.2 basis points to 1.8%. The yield on the active 30-year bond, "25超长特别国债06", edged up by 0.2 basis points to 2.2275%, after having fallen to 2.219% during the session. Yields on government bonds of other maturities also declined to varying degrees.
A senior bond market analyst stated that recent market activity is primarily driven by speculation about a potential interest rate cut following the holiday. Reviewing recent bond market performance, the downward trend in the 10-year yield is evident, having fallen by a cumulative 1.5 basis points since last week and approximately 10 basis points from its high near 1.9% on January 7th.
Another notable signal is the accelerated decline in yields for ultra-long-term bonds, which had previously diverged from the 10-year bond for an extended period. Last week, the yield on "25超长特别国债06" fell by a cumulative 2.6 basis points, narrowing the spread between them to within 43 basis points.
The logic behind the recent bond market recovery, according to consolidated institutional views, involves both the impact of weaker fundamental economic data and support from ample liquidity. A direct positive factor is the volatility in equity and commodity markets, which has provided safe-haven support, further highlighting the allocation value of bonds.
From a macro data perspective, China's Manufacturing PMI fell to 49.3% in January, dropping below the 50-point mark that separates expansion from contraction, which has heightened market expectations for additional supportive policies.
Ming Ming, Chief Economist at CITIC Securities, believes the recent warming of the bond market is mainly due to two positive factors: first, the weakening赚钱效应 in assets like equities and commodities; second, the central bank's reassuring signals, which have intensified expectations for broader monetary easing.
From an institutional allocation standpoint, Lü Pin, Chief Fixed-Income Analyst at Zhongtai Securities, suggests that around the Spring Festival, both bulls and bears in the bond market are increasing their positions, approaching a critical "showdown" moment. On the bull side, continued buying by major state-owned banks is a significant force driving the strength in government bonds with maturities up to 10 years.
A recent Zhongtai Securities report indicated that as of February 6th, major state-owned banks were continuously buying the active 10-year bond, "25附息国债16", making them the only net buyers among all institutions, with cumulative net purchases reaching 99.3 billion yuan. This has also drawn market attention to the maturity focus of the central bank's potential bond buying and selling operations, Lü Pin mentioned.
In fact, several signals have already drawn market attention regarding the motivation for banks, particularly major state-owned banks, to increase bond purchases, especially longer-term bonds. These include portfolio replenishment after year-end indicator assessments, weaker-than-expected credit growth hinted at by bill rates, and low certificate of deposit rates indicating a lack of quality assets rather than liabilities.
As the 10-year bond yield breaks through the significant 1.8% level, is the market facing profit-taking pressure? The aforementioned bond market analyst judges that, considering the intensifying expectations for monetary easing after the holiday, the bond market performance before the holiday is expected to be generally strong.
A recent report from Golden Credit Rating also believes that as the Spring Festival approaches, considering the central bank's likely efforts to ensure stable liquidity and the coupon income during the holiday, institutions have a stronger willingness to hold bonds, which will support the pre-holiday bond market. Simultaneously, volatile overseas factors and significant fluctuations in stock and commodity markets, with risk appetite not fully recovered, will continue to benefit the bond market.
Regarding monetary easing expectations, the 7-day reverse repo rate is a recent market focus, also seen as a key factor influencing the downward shift in the 10-year yield's center. Zhang Xu, Chief Fixed-Income Analyst at Everbright Securities, mentioned that this is mainly because many investors interpret the marginal winning rate for the 3-month buy-out reverse repo on February 4th, which fell to 1.4%, as a signal. Given that the current 7-day reverse repo rate is also 1.4%, and there is typically a term spread between them, some investors believe the decline in the 3-month rate will pressure the central bank to cut the 7-day rate.
CITIC's Ming Ming, combining the central bank's January statement that "there is still some room for RRR and interest rate cuts this year" with actions like structural rate cuts, doubling net Treasury purchases to 100 billion yuan, and conducting 14-day reverse repo operations on two consecutive days last week, stated that historically, there might be a time lag between structural and broad-based rate cuts, but the direction is consistent. After this structural cut brought the 1-year relending rate down to 1.25%, it is now below the 7-day reverse repo rate for the first time since July 2024. With this round of structural cuts preceding potential broad-based cuts, and as large amounts of time deposits mature in the first quarter, easing banks' net interest margin pressure, the window for a reverse repo rate cut may open.
Zhang Xu believes that since the Central Economic Work Conference in December, AAA-rated interbank certificate of deposit rates across different maturities have been on a steady downward trend, reflecting strengthened counter-cyclical adjustment by monetary policy. A policy rate cut within the next 2-3 months is something that can be anticipated. Both internal and external factors constraining rate cuts have significantly eased recently; the timing of implementation now depends primarily on the economic situation, he said. However, he also emphasized that there is no necessary, or at least no direct, link between the decline in the marginal winning rate for the buy-out reverse repo and a cut in the 7-day reverse repo rate. Therefore, for most investors, it is sufficient to focus on market rates available in real-time, without over-analyzing the quantity or winning rates of central bank operations.
Against the backdrop of stable pre-holiday liquidity and reduced divergence in monetary easing expectations, the focal point of the bull-bear博弈 may shift further towards fundamentals. The January CPI and PPI data, due this week, have become a key focus. Liu Yu, Chief Fixed-Income Analyst at Huaxi Securities, believes that pre-holiday stock market volatility and inflation concerns could be the main阻力 to further declines in bond yields.
Lü Pin mentioned that the current bearish logic in the bond market primarily revolves around concerns over bond supply and the relatively high valuation of ultra-long-term bonds. Based on disclosed issuance plans, supply in February is not insignificant, with a total规模接近7700 billion yuan. Specifically, special bond issuance plans are higher than in January, and due to the Spring Festival holiday, the average daily supply pressure on trading days could be even greater than general market expectations for February supply back in January, he noted in the latest report.