The bond market continues its strong performance, with medium to long-term bonds &#34;leading&#34; the recovery. On April 13, Wind data showed that the yields on major interest rate bonds mostly declined, with significant drops in the yields of 30-year and 10-year government bonds, where the 30-year government bond yield fell by more than 2 basis points in a single day. Meanwhile, government bond futures closed higher across the board, with all varieties rising, and the main contract for 30-year bonds increasing by 0.38%.
Funds in the bond market are flowing towards the medium to long end, closely related to the low operating levels of funding rates and the crowded short bond trading. Since April, the People's Bank of China has shown a significant volume characteristic in its reverse repurchase operations, evolving towards a relatively loose funding environment, which has also brought a more abundant liquidity situation to the bond market. Analysts point out that risk appetite and funding remain the two main variables determining the trends in the long and short ends of the bond market, and it is currently an important window period for the long end of the bond market.
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Short end remains stable
Long end declines rapidly
On April 13, apart from the 1-year and 5-year government bonds, which remained basically flat compared to the previous trading day, the yields of other major government bonds of different maturities showed varying degrees of decline, with significant drops in the yields of 30-year and 10-year government bonds.
Wind data showed that as of the close of that day, the yield on the 10-year government bond fell by 1.95 basis points to 1.7880%, while the yield on the 30-year government bond fell by 2.45 basis points to 2.2805%. In terms of short-end rates, the yields on the 2-year and 3-year government bonds both fell by 0.25 basis points, reporting 1.3200% and 1.3525%, respectively.
On the same day, government bond futures closed higher across the board, with the main contract for 30-year bonds rising by 0.38% to 112.750 yuan, the main contract for 10-year bonds rising by 0.09% to 108.365 yuan, the main contract for 5-year bonds rising by 0.07% to 106.010 yuan, and the main contract for 2-year bonds rising by 0.03% to 102.510 yuan.
Beijing Business Journal noted that in the week just past (April 7-10), the yields of government bonds of various maturities in the bond market showed a divergent trend, with the ultra-long end performing better, where the yield on the 30-year ultra-long government bond fell by 6.7 basis points in a week, while the 10-year government bond slightly dropped by 0.77 basis points. During the same period, apart from the 1-year government bond, which fell by 2.5 basis points, the yields on other short-end government bonds such as the 3-year and 5-year bonds rose during the week. Coupled with the continuous decline on April 13, the yield on the 30-year ultra-long government bond has dropped to its lowest level since March 5.
With the short end remaining stable and the long end declining rapidly, the yield curve in the bond market is showing a flattening trend. Feng Lin, Executive Director of the Research and Development Department at Dongfang Jincheng, told Beijing Business Journal that the recent funding environment has remained relatively loose, and the temporary ceasefire agreement reached between the U.S. and Iran last week has slightly eased market inflation concerns. The inflation data for March released on April 10 was basically in line with expectations, and there are market rumors that the issuance period for special government bonds may be shortened, leading to an overall strong performance in the bond market
&#34;Loose liquidity drives short-term bond yields to continue declining, but as the short-term bond market has become quite crowded, the market has begun to position itself upwards along the yield curve. In this context, ultra-long bonds have benefited from trading opportunities brought about by previous overselling and rumors of possible adjustments to the issuance period of special treasury bonds, showing relatively outstanding performance recently,&#34; Feng Lin added.
Loose liquidity
Abundant liquidity in the bond market
It is worth mentioning that since entering April, the People's Bank of China (PBOC) has shown a significant volume characteristic in its reverse repurchase operations. After conducting the smallest scale 7-day reverse repurchase in over a decade on April 1, the scale of the PBOC's 7-day reverse repurchase operations has mostly concentrated around 500 million yuan, with a maximum of 2 billion yuan. Since April 2, the PBOC has mentioned in its public market operation announcements that the relevant operations &#34;fully met the demand of primary dealers.&#34;
On April 13, the PBOC conducted a 500 million yuan 7-day reverse repurchase operation through a fixed rate, quantity tender method, fully meeting the demand of primary dealers, with an operation rate of 1.40%. As there were no reverse repos maturing that day, a net injection of 500 million yuan was achieved.
Combining the performance of the interbank market, according to Wind data, as of the close on April 13, the Shanghai Stock Exchange 1-day treasury bond reverse repurchase rate (GC001) fell by 7 basis points to 1.356%; the weighted average rate of DR007 rose by 5.16 basis points to 1.3679%, below the policy rate level, with this data touching a new low of 1.200% during the previous trading day; the weighted average rate of DR001 fell by 0.78 basis points to 1.2258%.
On the same day, the Shanghai Interbank Offered Rate (Shibor) fluctuated, with the overnight Shibor reported at 1.2240%, up 0.20 basis points; the 7-day Shibor reported at 1.3590%, up 4.00 basis points; the 14-day Shibor reported at 1.3970%, up 4.40 basis points; the 1-month Shibor reported at 1.4550%, down 0.65 basis points.
CITIC Securities Chief Economist Mingming pointed out that since April, the operating center of DR007 has fallen below the 1.4% 7-day reverse repurchase rate, reflecting a relatively abundant liquidity environment in the bond market. In this context, the PBOC has adopted a very low scale of liquidity injection, indicating that it &#34;fully met the demand of primary dealers.&#34; The core reason is that the current operation mode of the 7-day reverse repurchase is fixed rate and quantity tender, so the extremely low level of liquidity injection essentially reflects the market's low demand for liquidity provided by the PBOC, rather than the PBOC actively tightening liquidity.
Feng Lin stated that since April, the liquidity has evolved towards a relatively loose direction, mainly due to the PBOC's comprehensive use of tools such as reverse repos, MLF, and treasury bond transactions in January and February this year, resulting in a net injection of medium- and long-term liquidity of 2.05 trillion yuan, significantly more than the same period last year by 745 billion yuan; at the same time, bank credit issuance at the beginning of the year was relatively moderate, and the net financing scale of government bonds decreased in March, with the issuance pace of government bonds since April not significantly accelerating
In addition, the recent sudden changes in the Middle East situation have led the market to generally expect that the People's Bank of China will place greater emphasis on maintaining ample liquidity.
Feng Lin pointed out that the recent &#34;liquidity withdrawal&#34; operations by the People's Bank of China have released signals to guide the stability of the funding environment, avoiding excessive downward deviation of major market interest rates from policy rates, which helps stabilize market expectations. However, this does not indicate a fundamental shift in the moderately accommodative monetary policy tone and the peak-filling open market operation model. It is expected that as major market interest rates rise back to near policy rates, the scale of open market operations will increase, and reverse repos are also expected to resume net injections.
Risk appetite and liquidity are the two major variables in the market.
Currently, it is still a long-end game window.
On April 10, the National Bureau of Statistics released data showing that the Consumer Price Index (CPI) for March fell by 0.7% month-on-month and rose by 1.0% year-on-year; the Producer Price Index (PPI) rose by 1.0% month-on-month and increased by 0.5% year-on-year. The year-on-year PPI turned from decline to increase in March, which is basically in line with market expectations. Coupled with changes in the U.S.-Iran conflict, inflation expectations have received widespread attention regarding their impact on the bond market.
In terms of monetary supply, on April 13, the People's Bank of China released the financial statistics report for the first quarter of 2026, showing that M2 (broad money) grew by 8.5% year-on-year in March, a decrease of 0.5 percentage points from the previous month; M1 (narrow money) grew by 5.1% year-on-year, a decrease of 0.8 percentage points from the previous month; new RMB loans amounted to 2.99 trillion yuan, a decrease of 650 billion yuan year-on-year. Ming Ming stated that due to the slow credit supply, the year-on-year growth rates of M1 and M2 are unlikely to directly shake the current loose basis of the funding environment.
The future direction of the funding environment is also highly correlated with changes in market risk appetite and will further transmit to the bond market. Liu Yu, chief economist at Huaxi Securities, believes that the ongoing overseas conflicts make it unlikely for the People's Bank of China to significantly tighten funds in the short term, as it is more about reasonably recovering redundant liquidity. Looking ahead, risk appetite and liquidity remain the two major variables determining the long and short-term trends of the bond market. Until the overseas conflicts are resolved, market risk appetite may remain weak, and the state of liquidity easing is also difficult to shake in order to maintain confidence in the stock market.
Liu Yu stated that if overseas uncertainties are eliminated and the stock market regains spontaneous upward momentum, the People's Bank of China may correspondingly restart liquidity control, making an ultra-loose environment difficult to sustain. Therefore, from the current standpoint, mid-April remains an important window period for duration arbitrage.
Feng Lin pointed out that looking ahead, the current situation in the Middle East still has considerable variables, market uncertainty remains high, and inflation concerns are temporarily difficult to alleviate substantively. However, the bond market has already priced in the upward inflation and the weakening of interest rate cut expectations relatively fully, and the suppression of market sentiment has weakened. Meanwhile, trade data for March will be released this week, with March exports expected to be strong and continue to support fundamental resilience, while domestic demand is still expected to be weak. The fundamental expectations are unlikely to change significantly, and the impact of data release on the bond market will be relatively limited. Overall, under the intertwining of bullish and bearish fundamentals, the bond market still lacks trending opportunities and will continue to experience a volatile market in the short term
Beijing Business Reporter Liao Meng

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On April 13th, the bond market continued its strong performance, with medium to long-term bond yields significantly declining, and the yield on 30-year Treasury bonds dropping by more than 2 basis points. The People's Bank of China maintained a low volume of reverse repurchase operations, leading to a loosening of the liquidity environment and promoting ample liquidity in the bond market. Analysts pointed out that risk appetite and capital are key factors influencing the bond market's trends, and the current period is an important window for long-end bond market speculation. Treasury futures rose across the board, with the main contract for 30-year bonds increasing by 0.38%

The People's Bank of China maintains a low level of reverse repos, the bond market yield curve flattens, and funds shift to the medium and long end