Key facts
- China's central bank plans new metrics to curb banks' long-dated bond holdings.
- The new metrics are part of the Macro Prudential Assessment framework.
- The plan aims to reduce investment risks associated with long-dated bonds and funds.
- Specific benchmarks are still being discussed with the industry.
- The 10-year bond yield was 1.68% on Monday, near its lowest since July 2025.
- The 30-year bond yield was 2.17% on Monday.
China's central bank is planning to introduce new metrics into its Macro Prudential Assessment framework to curb banks' excessive holdings in long-dated bonds and funds, according to sources familiar with the matter. The move aims to mitigate investment risks that could arise from these holdings. The plan also includes measures to track deviations from money market and bond yields. The specific benchmarks for these new metrics are still being discussed with the industry and are subject to consultation, with finalization pending. China's bond market has experienced a rally this year, diverging from global trends, fueled by expectations of further policy support amid lackluster economic data. On Monday, the 10-year bond yield was hovering near its lowest level since July 2025 at 1.68%, while the 30-year yield stood at 2.17%. Market participants noted that some smaller banks might exceed limits on bond investment duration and fund investments, potentially requiring adjustments to their portfolios. The Macro Prudential Assessment framework, implemented by the People's Bank of China in 2016, is a core component of China's regulatory approach, combining monetary and macro-prudential policies.