China’s 10-year government bond yield fell to around 1.81% on Thursday, extending the previous session’s decline and touching a one-week low, as investors reassessed expectations for the People’s Bank of China’s next policy steps.
Signals from Beijing’s interest rate markets now suggest a reduced likelihood of further monetary easing, as early 2026 indicators point to a stronger-than-anticipated start to the year. The brighter outlook is supported by a modest recovery in consumer prices and a slowdown in factory-gate deflation.
At the same time, a sharp rise in global oil prices—driven by escalating tensions in the Middle East—may constrain the central bank’s room to pursue aggressive easing. Against this backdrop, markets are increasingly pricing in a steady, or even slightly tighter, policy stance.
Attention is now turning to Friday’s update of the benchmark loan prime rate. The one-year and five-year LPRs are widely expected to be left unchanged at 3.0% and 3.5%, respectively.
