China’s 30-year bond auction draws highest yield since March

China’s 30-year government bond auction on Thursday drew its highest yield since March, as risk sentiment improved and concerns over further losses cooled demand for debt.

The Ministry of Finance sold the 30-year special sovereign notes at an average yield of 1.97% on Thursday, according to traders who bid at the 83 billion yuan ($11.6 billion) offering. That’s the highest level since March in auctions on the tenor, Bloomberg-compiled data showed.

Chinese long-term debt came under pressure this week, as expectations for a potential extension of the US tariff truce and Beijing’s campaign to curb industrial oversupply helped improve sentiment about the nation’s growth outlook.

Looking ahead, traders are also concerned about a possible increase in long-term debt supply if the government ramps up fundraising and spending to support the economy — especially if there is a budget deficit increase later this year.

Futures on Chinese longer-term government bonds extended declines into a seventh session in morning trading on Thursday, a day after seeing their longest run of losses since the contracts of the tenor were launched in April 2023. Yields on 30-year cash notes traded at around 1.95%, set for the highest level since early April.

Interbank borrowing costs were also on the rise after the People’s Bank of China drained liquidity from the banking system this week, dampening mood in bond trading. China’s overnight interbank repo rate increased 28 basis points to 1.65% on Thursday, set for the steepest one-day advance this year.

A gauge of Chinese stocks in Hong Kong rose as much as 0.6% on Thursday to its highest since 2021.

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