Market Summary

Yield Movements

The People's Republic of China's (PRC) yield curve steepened between 2 June and 29 August due to improved sentiment, despite some weaker economic data, over easing tensions in the PRC-United States trade dispute and continued government support measures. Investors rotating funds from bonds into stocks following the PRC-United States trade pause extension also added upward pressure on long-term yields.

Local Currency Bond Market Size and Issuance

The PRC's local currency bond market grew to a size of CNY165.3 trillion at the end of June, supported by expansions in both the government and corporate segments. Total bond market growth accelerated to3.5% quarter-on-quarter (q-o-q) in the second quarter of 2025 from 3.0% q-o-q in the prior quarter, buoyed by increased issuance during the period amid government stimulus measures. Outstanding government bonds rose 3.9% q-o-q to CNY113.8 trillion, matching the previous quarter's growth while growth in the corporate bond segment accelerated to 2.5% q-o-q from 1.0% q-o-q in the previous quarter on increased issuance in both the financial and nonfinancial sectors as borrowing costs declined. During the second quarter of 2025, the PRC's bond issuance rebounded, rising 23.2% q-o-q to CNY14.8 trillion.

Sustainable Bond Market

The PRC continued to lead the green bond market in emerging East Asia. Green bonds dominate the PRC's sustainable bond market with a share of 86.8%. However, the PRC's green bonds carry relatively short-term tenors, with the share of bonds with remaining tenors of 5 years or less at 87.5%; shorter maturities can pose a challenge to funding long-term projects.