Citi Recommends Buying China 30-Year Government Bonds, Targeting 1.80% Yield
nashnova research
Citi recommends buying China's 30-year government bonds at a 2.088% entry yield, targeting 1.80% — weak domestic demand and fading supply pressure should keep pushing long-end rates lower, making Chinese duration a standalone trade in a diverging global bond market.
Why is Citi going long on Chinese duration now?
Citi analysts Wenhan Chen and Rohit Garg issued a clear trade call: buy the 30-year bond at 2.088%, target 1.80%.
Two pillars underpin the call: weak domestic demand keeps weighing on growth expectations, and sluggish credit creation caps any yield rebound.
This means → Citi sees the forces pushing yields down as structural, not cyclical — hence the conviction to bet on long-duration bonds.
In plain terms = bond yields falling means bond prices rising. Citi is betting on a chain: weak economy → nowhere for money to go → money piles into long bonds → prices keep climbing.
What is the supply-side tailwind?
China's 1.3 trillion yuan ultra-long special bond issuance plan for 2026 is roughly 90% complete; the remainder is expected to wrap up by October.
This means → peak new supply has passed, removing the overhang that could have weighed on prices.
A separate boost: a recent 360 billion yuan capital replenishment plan for major financial institutions is expected to drive fresh institutional demand for long-dated bonds.
In plain terms = supply is shrinking and demand is growing — both sides favour long-bond prices at the same time.
What about the 10-year bond?
Citi is also bullish on the 10-year, forecasting its yield will fall to 1.60%; it traded at roughly 1.67% on Monday.
The logic mirrors the 30-year trade: soft credit demand caps upside in yields, while the PBoC's ongoing bond purchases provide structural support.
Citi also expects the spread between the 10-year and 30-year — currently at the wide end of its three-year moving average — to narrow.
This means → the 30-year has more room to rally than the 10-year, which is why Citi placed its primary trade there.
Why is China's bond market moving opposite to the world?
Major economies are grappling with sticky inflation and rising yields; China's yields keep falling because domestic demand and credit creation remain weak.
This reflects a cycle mismatch: most of the world is tightening, while China still needs easing.
Citi's bullish call rests squarely on this logic — Chinese long bonds are a standalone theme within a diverging global bond market.
In plain terms = global bonds are selling off while Chinese long bonds are rallying. Citi is betting that divergence has further to run.
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