China’s 10-year government bond yield rose to around 1.65%, as the People's Bank of China (PBOC) announced plans to sell 60 billion yuan worth of six-month bills in Hong Kong on January 15. This move was the largest sale since 2018, aimed to absorb liquidity from the market and reduce speculative bets against the yuan. This tightening of liquidity is expected to push up short-term interest rates, adding upward pressure on bond yields. The PBOC’s actions reflect its continued efforts to stabilize the currency and manage volatility in the market. Last week, the PBOC unexpectedly paused bond purchases due to a supply shortage and economic concerns, aiming to resume based on market conditions. This move could help slow the drop in yields and narrow the interest-rate gap with the US. Meanwhile, latest data showed that China's trade surplus surged to USD 104.84 billion in December, marking the largest surplus since February 2024, as exports jumped 10.7% year-on-year, all exceeding forecasts
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