Chinese government bond supply is expected to increase in the next quarter as authorities accelerate debt issuance to fund stimulus efforts, potentially challenging the market’s rally. Sales of new local government special bonds reached only 81% of the annual quota in the first nine months, with fourth-quarter issuance potentially exceeding 820 billion yuan ($122 billion) if the remaining quota is used by year-end—the largest quarterly supply in nearly five years. The State Council’s recent meeting signaled urgency to stabilize investment and economic growth, with officials considering tapping unused quotas from prior years.

Lynn Song, chief economist for Greater China at ING Bank NV in Hong Kong, noted that if policy support measures follow, bond yields may rise by year-end. China’s benchmark 10-year bond yield fell to 1.67% last week, its lowest since July 2025, driven by economic weakness and low inflation. Increased supply could push yields higher.

Gao Xiang of Nanhua Futures Research Institute estimated that new issuance from outstanding quotas this year could total between 100 billion and 200 billion yuan, citing precedent from 2022 when 500 billion yuan in unused quotas were authorized for major projects.