China's 30-year government bond yield down 2 basis points to 1.9270% in early trades

China's 30-year government bond yield down 2 basis points to 1.9270% in early trades

China's 30-year government bond yield fell by 2 basis points to 1.9270% in early trading on July 2, 2025, according to market data. This downward movement comes after a period of increased risk sentiment and concerns over further losses in the debt market. The yield, which had been trending higher, now stands at its lowest level since March 2025 [1].

The Ministry of Finance sold the 30-year special sovereign notes at an average yield of 1.97% on July 24, 2025, marking the highest yield since March. This auction saw a strong demand despite the recent volatility in the market [1]. The improved risk sentiment and reduced pessimism about China's growth outlook have been cited as key factors driving the change in investor sentiment.

The decline in the yield is also attributed to optimism around a potential extension of the US tariff truce and Beijing's efforts to curb industrial oversupply. These developments have helped to alleviate market concerns about the nation's economic growth prospects [1].

Looking ahead, traders are concerned about a possible increase in long-term debt supply if the government ramps up fundraising and spending to support the economy. This could potentially lead to an increase in yields if the budget deficit increases later this year [1].

Moreover, the Shanghai Stock Exchange has introduced a new framework to facilitate corporate bond sales, aiming to broaden the financing pipeline for private companies. Under this new mechanism, 53 bonds worth 37 billion yuan ($5.2 billion) have been sold, with coupon rates averaging just shy of 3% [2]. This initiative is part of China's broader effort to address the mismatch in its corporate bond market, where state enterprises dominate the market.

The new framework also includes measures to protect investors and improve disclosures, which could potentially enhance the attractiveness of these bonds to investors seeking higher yields. However, the uncertain outlook for private businesses and the potential for higher default risks remain concerns for investors [2].

In the ETF space, PGIM has filed for three actively managed bond ETFs targeting short-, mid-, and long-term corporate debt maturities. These funds aim to provide investors with specific exposure along the yield curve and total return through income and capital appreciation [3]. The proposed ETFs, which are expected to debut after July, could offer investors more precise instruments to manage duration risk in an era of evolving Fed policy and an uncertain macroeconomic environment.

References:
[1] https://www.bloomberg.com/news/articles/2025-07-24/china-s-30-year-bond-auction-draws-highest-yield-since-march
[2] https://www.reuters.com/world/china/shanghai-bourse-gives-bond-investors-taste-high-yields-with-new-framework-2025-07-25/
[3] https://www.benzinga.com/etfs/new-etfs/25/07/46613442/pgim-targets-yield-hunters-with-3-new-corporate-bond-etfs-in-the-pipeline