Key facts
- Citi Research recommends investors buy China's 30-year government bonds.
- Citi analysts expect the 30-year yield to fall towards 1.80%.
- Citi analysts expect the 10-year yield to fall towards 1.60%.
- The recommendation is based on weak domestic growth and limited long-term debt availability.
- China has issued approximately 90% of its planned 1.3 trillion yuan in ultra-long special treasury bonds for 2026.
Citigroup analysts are recommending that investors buy China's 30-year government bonds, anticipating that persistent economic weakness and limited availability of extended-maturity debt will increase demand for these securities. The bank's analysts, Wenhan Chen and Rohit Garg, have established a long position in the 30-year Chinese government bonds at a yield of 2.088%, targeting a yield of 1.80%. They also project the 10-year yield could decline towards 1.60%.
This optimistic assessment for Chinese bonds contrasts with the broader global fixed-income market, where elevated inflation has driven yields higher across major developed economies. In China, subdued credit expansion and weak domestic consumption are constraining domestic yields. The country has already issued approximately 90% of its planned 1.3 trillion yuan ($194 billion) in ultra-long special treasury bonds for 2026, with the remainder expected to conclude in October. Citi anticipates that conventional longer-maturity bond offerings will resume in the fourth quarter at lower volumes than the special treasury bonds.
Demand for extended-maturity bonds is expected to be further supported by Beijing's recent 360 billion yuan recapitalization initiative for major financial institutions. The People's Bank of China is reportedly considering new measures to monitor banks' exposure to long-duration bonds and funds, a move that could mitigate risks associated with potential mark-to-market losses for financial institutions if yields were to rise suddenly.