China's 10-year government bond yield rose to around 1.68%, hitting its highest level in three weeks, as traders digested President Trump’s trade policy announcements. In his inaugural address, Trump proposed 25% tariffs on Mexico and Canada and hinted at stricter tariffs on China. He stated that tariffs on China could depend on a deal regarding TikTok's ownership, while extending TikTok’s U.S. operations for 75 days. Despite these uncertainties, hopes of potential U.S.-China negotiations gained traction as Trump reportedly expressed interest in visiting China. Additionally, President Xi Jinping urged policymakers to adopt more proactive macroeconomic policies to sustain growth. The People's Bank of China kept its key lending rates unchanged in January, maintaining the one-year Loan Prime Rate (LPR) at 3.1% and the five-year LPR at 3.6%. Strong GDP growth and ongoing policy support in China also helped boost bond yields, as investors priced in inflation and potential rate adjustments.
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