FX.co ★ China 10Y Yield Falls After PBOC Policy Shift

China’s 10-year government bond yield fell to around 1.64%, reversing the previous session’s gains, after the People’s Bank of China (PBOC) signaled a shift to an overnight-rate-based monetary policy framework that points to lower short-term funding costs. Under the new regime, the central bank will conduct daily overnight reverse repo operations at a fixed rate of 1.25%, positioning the overnight rate as its primary policy anchor and gradually phasing out the long-standing seven-day benchmark.

The newly announced rate is below the current seven-day reverse repo rate of 1.4% and roughly in line with both market expectations and prevailing money-market funding costs. At the same time, weaker-than-expected official PMI data highlighted ongoing softness in economic activity. The manufacturing PMI fell to a three-month low of 49.3 in October 2026 from 50.1 in September, while the non-manufacturing PMI declined to 49.7 from 50.2, marking its sixth contractionary reading this year.