China's 10-year government bond yield edged down to approximately 1.73% on Tuesday, retracing some gains from the previous session. This movement reflects investor caution as attention focuses on the continued US-China trade negotiations. Entering their second day, these talks aim to extend a delicate trade ceasefire by an additional 90 days, with the deadline looming on August 12. A successful resolution could pave the way for a meeting between Presidents Trump and Xi Jinping later this year, potentially reducing tensions in critical areas such as semiconductors and rare earths.
On the home front, fiscal priorities remain centered on the implementation of special bonds. To date, 231 billion yuan has been allocated to bolster the consumer goods trade-in program, with further bond issuance anticipated in October. This scenario has put slight downward pressure on yields due to apprehensions about increased supply. Investors are now keenly awaiting the upcoming release of July's PMI figures, along with an evaluation from a private sector survey.
