US Treasury Yield Curve Nears Recession Warning, Market Narrative May Shift to Stagnation Risk
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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.
Source report
- Central Bank: The People's Bank of China stated it will comprehensively utilize and timely adjust monetary policy tools to maintain ample liquidity.
- Hong Kong Exchanges and Clearing (HKEX): Starting in November, its derivatives clearing house will accept Chinese government bonds, policy bank bonds, and Ministry of Finance bonds as non-cash collateral.
- Federal Reserve: Sources indicate the Fed plans to raise the threshold for bank supervision.
- U.S. Treasury: The buyback of 20- to 30-year Treasury bonds did not reach the $6 billion cap.
- Federal Reserve's Hammack: The rise in U.S. Treasury yields is not due to a loss of confidence in inflation.
- U.S. Treasury Yield Curve: The curve is nearing a warning signal, suggesting the market narrative may begin to shift toward risks of economic stagnation.
- Jefferies: Inflation and fiscal deficits may continue to pressure long-end bonds; the firm remains cautious on long-term government bonds.
- Citigroup Strategists: The U.S. Treasury market is experiencing mild buyer hesitation, with no Treasury auctions scheduled this week.
- JPMorgan: Maintains a bearish stance on U.S. Treasury duration, though the bearish inclination has weakened compared to previous weeks.
- Swissquote Bank: High sovereign bond yields are unsettling equity investors.
- Fujian Provincial Banks: Local banks in Fujian have innovated their financial bond issuance mechanisms.
- New Special Bond Issuance: Year-to-date issuance of new special-purpose bonds has exceeded 3.36 trillion yuan, completing over 70% of the full-year quota of 4.4 trillion yuan.
Source
domesticNeutral / independent
Part of this Story
PBOC Vows Ample Liquidity; HKEX to Accept Chinese Bonds as Collateral; US Yield Curve Warns of Stagflation