On July 20, 2023, a man walked past the People's Bank of China (PBOC) building in Beijing, China. (Photo by Jiang Qiming/China News Service/VCG via Getty Images
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Chinese bond yields fell to record lows after the People's Bank of China announced on Tuesday that it would lower bank deposit reserve ratios.
Data from the London Stock Exchange showed that China's 10-year government bond yield fell 3.75 basis points to 2.043%, a record low. The 30-year Treasury yield also fell to a record low of 2.168%.
Pan Gongsheng, governor of the People's Bank of China, announced at a press conference that China will reduce the deposit reserve ratio or bank cash holdings by 50 basis points.
Data from the London Stock Exchange (LSEG) showed that China's onshore yuan fell to 7.06 against the US dollar.
The relatively unusual high-level press conference was arranged after the Federal Reserve cut interest rates last week, kicking off an easing cycle that could allow China's central bank to further cut interest rates to stimulate economic growth amid deflationary pressures.
Insurers and institutional investors have piled into China's bond market in recent months, in part because of limited investment opportunities. The housing market is down and the stock market is struggling to rebound from several years of slump.
Pan said a 0.2-0.25% cut in loan market quoted interest rates was also under consideration, but he did not specify when that would happen or whether he was referring to the one-year or five-year LPR. On Friday, the People's Bank of China kept its main benchmark lending rate at current levels during the monthly pricing period.
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