China's 10-year bond yield hits record low
What's the story
China's 10-year government bond yield has hit an all-time intraday low of 1.58%, according to Bloomberg. The fall comes as a result of the People's Bank of China (PBOC) adopting an overnight-rate-based monetary policy framework and maintaining loose funding conditions. The move is seen as a shift in the central bank's policy framework rather than a conventional rate cut.
Policy change
PBOC's rate adjustment and its impact on bond yields
The PBOC's shift to overnight operations from November has further fueled the bond rally.
The central bank set the overnight reverse-repo rate at 1.25%, lower than its previous seven-day benchmark of 1.4%.
This move effectively lowers short-term funding costs, potentially putting further downward pressure on bond yields.
The onshore repo rate has remained around multi-month lows, supporting government bond demand amid ample liquidity in China's banking system.
Market response
Analysts' views on the implications of PBOC's strategy
Analysts have weighed in on the PBOC's strategy, with Becky Liu, head of Greater China strategy at Standard Chartered Bank, telling Bloomberg that "the room for more immediate easing is limited."
She added that "interbank rates will also stay lower and more stable," which could lead to a modest further decline in rates.