CNY rates: Exports and liquidity supported CGBs
Liquidity boost to CGB.
Group Research - Econs, Samuel Tse9 Sep 2026
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CGBs should continue to outperform from a total return perspective. USD/CNH has fallen to a four-year low of 6.71, while 2Y and 10Y CGB yields are hovering around 1.25% and 1.69%, respectively. The combination of resilient external demand, ongoing RMB internationalization and subdued domestic demand reinforces our constructive view on CGBs.

Export and import growth remained elevated at 25.0% YoY and 28.2% in August, up from 23.9% and 27.5% in July, respectively. The trade surplus expanded by 3.2%. The AI supercycle remains a key growth driver, with high-tech exports soaring 45.9% YoY YTD. Meanwhile, RMB internationalization is reinforcing the bond-supportive dynamics. Annualized CIPS usage reached a historical high of RMB2,872bn in June 2026. Rising RMB adoption should encourage exporters to retain or convert a greater share of their foreign-currency receipts into RMB. In fact, FX deposit growth has already slowed from a peak of 29.4% YoY in January to 16.0% in July.

The widening external surplus, alongside subdued domestic investment, implies higher national saving. With domestic demand remaining weak, excess savings are likely to continue flowing into domestic financial assets, helping anchor CGB yields. EPFR data also point to continued inflows into China bond funds, largely driven by domestic investors. Such dynamics should provide further support for both CGB prices and the CNY.



A stronger CNY should also give Beijing greater room to maintain an accommodative liquidity stance. The authorities recently announced a CNY300bn recapitalization plan for eight major banks and insurers. Although the recapitalization will be financed through special bond issuance, the resulting improvement in bank capital should support credit supply. However, weak credit demand could limit the transmission to the real economy, leaving banks with greater incentives to allocate excess liquidity to bonds.

That said, the ultra-long end could be increasingly vulnerable to overshooting. The 30Y CGB yield has fallen from 2.16% to 2.13% over the past two trading days. First, banks could be reluctant to increase position in ultra-long end bonds to avoid duration mismatch. Second, insurers may have less incentive to extend long duration bonds acquisition, as Beijing is pushing insurers to allocate 30% of new premium into equities. We therefore prefer the short-end and belly of the CGB curve over the ultra-long end, where valuations appear increasingly stretched.



Samuel Tse 謝家曦

Rates Strategist - Asia 利率策略师 - 亚洲
[email protected]




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