China's 10-year government bond yield fell to around 2.15%, following the People's Bank of China's decision to keep its key lending rates at historically low levels during the August fixing, as widely expected. The one-year loan prime rate (LPR), the benchmark for most corporate and household loans, was maintained at 3.45% while the five-year LPR, which serves as a key reference for property mortgages, remained unchanged at 3.85%. The decision highlights a measured approach by Chinese authorities, as Governor Pan Gongsheng stressed that the central bank is committed to avoiding 'drastic' economic measures. He also emphasized that the PBOC plans to speed up the implementation of existing financial policies, exploring new policy measures, and supporting proactive fiscal actions.
The yield on the Indian 10-year government bond was under 6.9% in August, hovering close to its lowest in over two years, as expectations of lower borrowing costs in the US and the prudent fiscal backdrop for the Indian government lifted demand for Indian fixed-income. The Indian GDP expanded 8.2% in FY2024 and PMIs have repeatedly passed the 60 threshold, while narrowing budget deficits magnified the impact of lower revenues needed to cover public expenditure, limiting the supply of bonds. This drove foreign funds to pile on Indian debt since last year, lastly underscored by the inclusion of Indian G-Secs in JPMorgan’s emerging market index. In the meantime, India tightened restrictions on foreign bond buying in 14 and 30-year G-Secs, but exchanges continued to note wide net foreign inflows at the start of August.
Japan’s 10-year government bond yield climbed toward 0.9% on Friday as Bank of Japan Governor Kazuo Ueda said in his Diet testimony that the central bank could adjust monetary policy if its economic projections materialize, indicating willingness to hike rates again if growth is strong and inflation remains sticky. Ueda added that they are closely monitoring market volatility, especially sharp yen moves that could affect the bank's median inflation forecasts. Investors also digested data showing Japan’s core inflation rate accelerated for the third consecutive month to 2.7% in July, supporting the Bank of Japan’s hawkish shift this year. The headline inflation rate remained unchanged at 2.8% for the third straight month.
