China’s 10-year government bond yield hovered around 1.81% on Friday, extending the previous session’s subdued performance, as investors assessed the People’s Bank of China’s cautious easing stance against a backdrop of mixed inflation data. Consumer prices rose 1% year-on-year in March 2026, slowing more than expected as demand linked to the Lunar New Year faded. In contrast, producer prices climbed 0.5%, their first increase since September 2022, driven in part by higher energy costs amid heightened tensions in the Middle East and disruptions in the Strait of Hormuz.
Although China’s strategic reserves and diversified energy import channels have helped buffer external shocks, signs of domestic cost pass-through are beginning to surface, as evidenced by the third retail fuel price hike since late February. Even so, at its latest quarterly meeting, the central bank reiterated a cautious policy approach, indicating limited appetite for aggressive monetary easing following a modest interest rate cut in 2025.
