PBOC Vows Ample Liquidity; HKEX to Accept Chinese Bonds as Collateral; US Yield Curve Warns of Stagflation
China's central bank pledged to maintain ample liquidity through flexible monetary policy tools. The Hong Kong Exchange will accept Chinese government and policy bank bonds as non-cash collateral for derivatives clearing starting November. In the US, the Treasury yield curve is nearing a warning signal, with market narratives potentially shifting toward stagflation risk. The Fed's Hammack stated rising yields are not due to loss of inflation confidence. Global debt reached a record $365 trillion in the first half of 2026.
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Cross-source coverage
Common ground
- The US Treasury market is showing real signs of dysfunction, like failed buybacks and widening spreads.
- The weaponization of the US dollar system is pushing countries to diversify their reserves away from US assets.
- Global debt at $365 trillion makes refinancing more expensive and risky for all major economies.
- A multipolar financial system is emerging, with China's bond market playing a growing role.
Points of contention
- Whether China's 1.67% 10-year bond yield is a deliberate policy choice or a sign of deflationary weakness.
- Whether China's local government hidden debt is manageable or a looming crisis.
- Whether foreign holdings of Chinese bonds reflect genuine confidence or just a geopolitical hedge against US sanctions.
- Whether China's bond market can replace the US Treasury market as a global safe haven.
Blind spots
- Both sides overlook how China's demographic challenges could mirror Japan's long-term stagnation.
- The debate ignores the risk that both US and Chinese bond markets could face simultaneous crises, leaving no safe option.
- Neither side fully addresses how China's policy interventions undermine its bond market's credibility as a risk-free benchmark.
WorldAttention’s read
The debate shows that while the US Treasury market is struggling with fiscal dysfunction and geopolitical overreach, China's bond market faces its own serious issues like deflationary pressure and hidden local debt. The world is moving toward a multipolar financial system, but no bond market is truly safe right now. China's bonds are becoming a useful hedge for countries wary of US sanctions, but they're not yet a reliable safe haven. The real risk is that both major markets have vulnerabilities that could make global finance more unstable for everyone.
Reporting timeline
China Pledges Liquidity, HKEX Accepts Chinese Bonds as Collateral, Fed Plans Higher Bank Threshold
This daily bond market news digest for September 28, 2026, covers key developments across Chinese and US fixed-income markets. China's central bank reiterated its commitment to maintaining ample liquidity through flexible use of monetary policy tools. The Hong Kong Exchange's derivatives clearing house will accept Chinese government bonds, policy bank bonds, and Ministry of Finance bonds as non-cash collateral starting November. In the US, sources indicate the Federal Reserve plans to raise the bank regulatory threshold. The US Treasury's 20-30 year bond buyback operation did not reach its $6 billion limit. Fed's Hammack stated that rising Treasury yields are not due to a loss of inflation confidence. The yield curve is nearing a warning signal, with market narrative potentially shifting toward stagflation risks. Jefferies remains bearish on long-end government bonds due to inflation and fiscal deficit concerns. Citigroup notes mild buyer hesitation in the US Treasury market with no auctions this week. JPMorgan maintains a bearish duration stance but with reduced conviction. Swissquote warns that high sovereign bond yields are unsettling equity investors. Domestically, Fujian provincial banks are innovating financial bond issuance mechanisms, and China's new special bond issuance has exceeded 3.36 trillion yuan, completing over 70% of the annual 4.4 trillion yuan quota.
China PBoC Vows Liquidity; HK Exchange to Accept Chinese Bonds as Margin; US Treasury Yield Curve Warns of Stagflation
This daily bond market briefing from Jin10 covers key developments on September 28, 2026. China's central bank pledged to flexibly use monetary policy tools to maintain ample liquidity. The Hong Kong Exchange will accept Chinese government, policy bank, and Ministry of Finance bonds as non-cash collateral for derivatives clearing starting November. In the US, sources indicate the Federal Reserve plans to raise bank regulatory thresholds. The US Treasury's 20-30 year bond buyback did not reach its $6 billion limit. Fed's Hammack attributed rising US Treasury yields to factors other than loss of inflation confidence. The yield curve is nearing a warning signal, with market narratives potentially shifting to stagflation risk. Jefferies remains bearish on long-end government bonds due to inflation and fiscal deficit concerns. Citigroup noted mild buyer hesitation in the US Treasury market with no auctions this week. Morgan Stanley maintained a bearish stance on US Treasury duration, though less strongly than in prior weeks. Swissquote warned that high sovereign bond yields are unsettling equity investors. Domestically, Fujian provincial banks innovated financial bond issuance mechanisms. China has issued over 3.36 trillion yuan in new special-purpose bonds this year, exceeding 70% of the 4.4 trillion yuan annual quota.
Read sourceChina August Local Gov't Bond Issuance Hits 644B Yuan; Bond ETF Scale Tops 1 Trillion
This article from Tencent Stock/Cailianshe provides a comprehensive overview of China's bond market as of late September 2026. Key data includes the Ministry of Finance reporting that in August 2026, China issued 644 billion yuan in new local government bonds, with total local government debt reaching 598.955 trillion yuan by end of August. The People's Bank of China reported that as of June 2026, overseas entities held 11.3 trillion yuan in domestic RMB financial assets, up 9.2% year-on-year. Bond ETF scale has surpassed 1 trillion yuan for the first time, with net inflows exceeding 100 billion yuan in Q3. The issuance of 6 trillion yuan in special refinancing bonds for local hidden debt is 98% complete, with market focus shifting to operational debt of financing platforms. Year-to-date special bond issuance has exceeded 3.36 trillion yuan, over 70% of the annual quota. Hong Kong Exchange announced plans to accept Chinese government and policy bank bonds held via Bond Connect as eligible non-cash collateral for derivatives margin from November 2026. Internationally, the US 10-year Treasury yield hit 5.23%, a nearly 20-year high, while UK gilt yields surged, pressuring public finances. The European Central Bank faces leadership vacancies. The article also covers open market operations, credit bond events, and detailed market movements across money, rate, credit, and international bond markets.
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Daily Bond Market Digest: PBOC MLF, US Treasury Buyback, Fed Rate Hike Signal, Global Debt Record
This daily bond market news digest for September 24, 2026, compiled by TradeAlpha, covers key developments across global fixed-income markets. The People's Bank of China conducted an 8000 billion yuan Medium-term Lending Facility (MLF) operation and announced overnight reverse repo operations from September 28 to October 8. The US Treasury announced a buyback of up to $60 billion in long-term bonds, though market participants question its effectiveness in alleviating fiscal pressure. Federal Reserve Governor Michelle Bowman (Barr) signaled that further interest rate increases may be necessary to ensure inflation returns to target in a timely manner. A financial institution reported that global sovereign bond yields are approaching an average of 4%, fueling expectations of further rate hikes. Global debt reached a record $365 trillion in the first half of 2026. Nvidia has become one of the most actively traded credit default swap (CDS) names in the US, reflecting surging hedging demand. Moody's reported that five major US tech companies have $2.8 trillion in AI-related off-balance-sheet liabilities. Domestically, China Development Bank deployed over 60 billion yuan in new policy financial instruments since September, and Xinhua Chemical plans to issue up to 900 million yuan in convertible bonds. In Japan, the 10-year government bond yield hit its highest level since 1996 amid a global bond sell-off, and Japan plans to reduce the size of its medium-term bond liquidity enhancement auctions.
Read sourceChina Bond Market Firms Up; Net Cash Withdrawal, Short-Term Rates Rise; Institutions Favor Ultra-Long Bonds
China's bond market showed a firming trend on September 24, with treasury bond futures closing higher across the board. The 30-year futures contract rose 0.31%, while the 10-year contract gained 0.03%. Yields on major government bonds were mixed, with the 30-year '26 Super-Long Special Bond 04' yield falling 0.25 basis points to 2.1175%, and the 10-year '26 T-bond 16' yield edging up 0.05 basis points to 1.6715%. The People's Bank of China conducted 51.5 billion yuan in 7-day reverse repos at a 1.40% rate, resulting in a net withdrawal of 110.5 billion yuan from the financial system as 162 billion yuan in repos matured. Short-term interbank rates rose, with the overnight Shibor up 0.27 basis points to 1.364%. Overseas, U.S. Treasury yields rose sharply, with the 10-year yield up 15.08 basis points to 5.112%. Institutions offered views: CITIC Securities noted that the U.S. faces high fiscal deficit pressure due to tariff refunds and rising debt interest, with net tariff revenue expected to fall by about $250 billion in fiscal 2026. Huatai Securities identified three market themes: Fed rate hikes, geopolitical tensions and oil prices, and AI narrative shifts, adding that the Fed is unlikely to hike in October but may do so in December.
China Bond Market Firms on Thursday; Net Cash Withdrawal of 110.5 Billion Yuan
China's bond market showed a firming trend on Thursday (September 24), with treasury bond futures closing higher across the board. The 30-year futures contract rose 0.31% to 117.37, while the 10-year contract gained 0.03% to 109.59. Yields on major government bonds moved narrowly, with the 30-year ultra-long special government bond yield falling 0.25 basis points to 2.1175%. The People's Bank of China conducted 51.5 billion yuan in 7-day reverse repos at a 1.40% rate, resulting in a net withdrawal of 110.5 billion yuan from the financial system as 162 billion yuan in repos matured. Short-term interbank rates edged up, with the overnight Shibor rising 0.27 basis points to 1.364%. Overseas, U.S. Treasury yields rose sharply, with the 10-year yield up 15.08 basis points to 5.112%. Citic Securities attributed the U.S. yield rise to the invalidation of IEEPA tariffs and large tax refunds, forecasting higher fiscal deficits and rising debt pressure. Huatai Securities noted three main trading themes: Fed rate hikes, geopolitical tensions and oil prices, and AI industry narratives, predicting a low probability of a Fed rate hike in October but a possible move in December.
China PBOC Raises Overnight Reverse Repo Cap to 1 Trillion Yuan for Holiday Liquidity
This article from Cailianshe, published on Tencent Stock, provides a comprehensive overview of China's bond market developments on September 24, 2026. Key highlights include the People's Bank of China (PBOC) raising its daily overnight reverse repo operation cap from 600 billion to 1 trillion yuan for the period from September 28 to October 8, aimed at smoothing liquidity fluctuations during the National Day holiday and month-end. The China Development Bank has deployed over 60 billion yuan in new policy financial tools since September to support private investment. The Bond Connect 'Southbound Connect' marks its fifth anniversary, with cumulative托管 balance reaching approximately 957.3 billion yuan. The article also covers the launch of amortized cost bond funds expected to bring over 200 billion yuan in incremental funds, a surge in QDII fund premiums following Fed rate hike expectations, and the release of new rules for Shanghai Free Trade Zone offshore bond business. Market data shows mixed performance in money markets, with long-term government bond yields near year-lows and credit bond yields mostly declining. International markets saw US and European bond yields rise sharply amid heightened Fed rate hike expectations.
Read sourceChina Bond Market: Overnight Reverse Repo Operations Planned for Quarter-End, Long-End Bonds Shine
China's bond market showed mixed performance on September 23, 2024, with long-end bonds outperforming despite a net liquidity withdrawal of over 100 billion yuan from open market operations. The People's Bank of China (PBOC) conducted 8 billion yuan in 7-day reverse repos at a 1.40% rate, while 110 billion yuan matured, resulting in the net drain. However, money market rates remained stable, with the DR001 weighted average around 1.36%. The PBOC announced after market close that it will conduct massive overnight reverse repo operations from September 28 to October 8, with a daily cap of 1 trillion yuan, to manage quarter-end liquidity needs. In the bond market, the 30-year government bond yield edged down 0.3 basis points to 2.131%, while the 10-year yield rose slightly. Analysts cited by the report noted that with fundamental and liquidity support, only further positive stimuli could drive yields lower, but the 10-year and 30-year yields are near year-to-date lows. They believe carry-based strategies remain dominant, with ultra-long bonds being the preferred long position, though significant further declines are unlikely given active trading rather than institutional allocation.
China Bond Market Weakens Slightly; Net Open Market Withdrawal of 102 Billion Yuan
China's bond market showed slight weakness on September 23, with interbank cash bond yields mostly recovering within 0.5 basis points and treasury bond futures closing lower across the board. The People's Bank of China conducted a net open market withdrawal of 102 billion yuan through an 80 billion yuan 7-day reverse repo operation against 110 billion yuan in maturing repos. Money rates generally continued to decline, with the overnight Shibor falling 0.27 BP to 1.3613%. In the primary market, the Ministry of Finance issued 91-day and 182-day treasury bonds with weighted average yields of 1.1101% and 1.1558% respectively. Overseas, US Treasury yields rose across the board on September 22. Citic Securities noted that the current inversion of 5-year and 3-year credit spreads reflects pre-trading of expected fund inflows from amortizing bond funds, but actual incremental funds have not fully materialized, suggesting potential spread correction in late October. Huatai Fixed Income identified three main trading themes: Fed rate hikes and overseas long-end rates, geopolitical tensions and oil prices, and AI industry narrative shifts, adding that a Fed rate hike in October is unlikely.
Read sourceChina Bond Market Weekly: Volatility Remains the Main Theme Amid Overseas Rate Hikes
This article from Great Wall Securities analyzes the Chinese bond market for the week of September 14-18. It notes that despite the Federal Reserve raising its target range by 25 basis points to 3.75%-4.0% on September 16, the Chinese bond market was largely unaffected. The 10-year Chinese government bond yield actually fell 0.7 basis points to 1.68%, and the 30-year yield fell 2.5 basis points to 2.13%. The analysis attributes this resilience to the domestic economic fundamentals providing support. August financial and economic data showed continued divergence, with weak credit demand (new yuan loans of only 600 billion yuan, down 530 billion year-on-year) and slowing social financing growth. Industrial production grew 5.2% year-on-year in August, but consumption and investment remained weak, with real estate investment down 19.9%. The article notes that the People's Bank of China maintained a neutral and steady liquidity stance, restarting 14-day reverse repos and increasing 7-day operations to offset tax-period pressures. The authors forecast that the bond market will likely continue its volatile but slightly strong trend, with the period of volatility potentially exceeding market neutral expectations, as the central bank has not signaled tightening despite limited probability of major aggregate policy measures in the short term.
Read sourceChina Bond Market Rises on Easing Liquidity; 30-Year Yield Dips Over 1 BP
China's bond market rallied on September 22, driven by easing liquidity and active trading by securities firms and funds. The 30-year government bond yield fell 1.31 basis points to 2.1325%, while the 10-year yield edged down 0.55 bp to 1.672%. Treasury futures closed higher across the board, with the 30-year contract rising 0.29%. The People's Bank of China injected a net 350 billion yuan via 7-day reverse repos at a 1.40% rate, fully meeting demand. Interbank rates mostly declined, with the 7-day Shibor falling 1.7 bp to 1.3893%. Analysts attributed the strength to a loose cross-quarter funding environment and market speculation, noting that trading desks were more active than institutional investors. However, they cautioned that further yield declines to previous lows are uncertain, and some traders may take profits ahead of the upcoming Mid-Autumn Festival and National Day holidays, which could introduce volatility.
Read sourceChina Bond Market Rallies on Loose Liquidity; 30-Year Yield Falls Over 1 BP
China's bond market rallied on September 22, driven by a shift to loose liquidity and active buying from securities firms and funds. The 30-year government bond futures contract rose 0.29%, while the 30-year active bond yield fell 1.31 basis points to 2.1325%. The 10-year yield edged down 0.55 bp to 1.672%. Analysts attributed the strength to a relaxed cross-quarter funding environment, with key repo rates below 1.40%, and market speculation ("small essays") that boosted sentiment. However, they cautioned that it is unclear whether yields can break previous lows, and noted that some institutions are beginning to adjust positions ahead of the Mid-Autumn Festival and National Day holidays, with some traders taking profits. The People's Bank of China injected a net 350 billion yuan via 7-day reverse repos at a 1.40% rate. Short-term Shibor rates mostly fell, and interbank repo rates declined, confirming ample liquidity.
Read sourceChina Bond Market Narrows; 10-Year Yield Edges Up 0.15 BP Amid Eased Liquidity
China's bond market experienced narrow trading on September 21, with the 10-year government bond yield rising 0.15 basis points to 1.6775%, according to data from Wind and reported by Cailianshe. The 30-year bond futures contract rose 0.15%, while shorter-term contracts fell slightly. The People's Bank of China conducted a net injection of 165 billion yuan via 7-day reverse repos at a 1.40% rate, fully meeting demand. The September Loan Prime Rate (LPR) remained unchanged, as expected. Analysts noted that while interbank funding costs saw minor increases, with the DR001 rising to around 1.35%, overall market liquidity remained relatively loose. They expect the central bank to continue supporting liquidity, limiting the upside for long-term bond yields. The asset shortage environment persists, and the yuan's resilience helps buffer external shocks from interest rate differentials. The report also detailed movements in exchange-traded bonds, with some corporate bonds rising over 3% and others falling nearly 3%.
Read sourceChina Bond Market Consolidates; PBOC Injects 165 Billion Yuan; Institutions Eye Q4 Supply Pressure
China's bond market traded in a narrow range on September 21, with cash bonds slightly outperforming futures. The 30-year government bond futures rose 0.15%, while shorter-dated futures edged lower. The People's Bank of China (PBOC) conducted a net injection of 165 billion yuan via 7-day reverse repos at a 1.40% rate, easing short-term funding costs after tax payment disruptions. The central bank also announced a 60 billion yuan 6-month central bank bill issuance in Hong Kong on September 23. Analysts offered mixed views: CITIC Securities noted that government bond issuance has been slow in the first three quarters, with supply pressure shifting to Q4, potentially requiring additional local bond quotas. Industrial Securities expects moderate funding tightening ahead of holidays and large government bond settlements, but sees PBOC maintaining stability via flexible operations. CICC Fixed Income argued that despite overseas rate hikes and energy inflation risks, China's bond yields have continued to decline, diverging from global trends, which it views as macro-logically consistent with tightening global liquidity benefiting Chinese bonds.
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