Financial Market Report (February 2026): PBOC
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February brought unusual calm to China's interbank markets. Overnight repo rates barely stirred, even as trading volumes swelled. DR001, the rate on overnight repos between depository institutions, held at 1.33 percent — unchanged from January. DR007 slipped two basis points to 1.49 percent.
The stillness belied a surge in activity. Interbank lending turnover jumped 87 percent from a year earlier to RMB429 billion daily. Bond repos averaged RMB7.4 trillion per day, up 53 percent.
Borrowing costs ease, foreign holdings steady
Government bond issuance slowed. Net financing fell to RMB1.4 trillion in February, down RMB293 billion year-on-year. Corporate net fundraising also contracted, by RMB18 billion.
The ten-year government bond yield ended the month at 1.78 percent. The spread between ten-year and one-year yields stood at 46 basis points — flat from January. Three-year AAA corporate bonds yielded 44 basis points over government paper, unchanged.
Overseas institutions held RMB3.4 trillion of China’s onshore bonds at end-February, or 1.7 percent of the total. Panda bond issuance in the first two months of 2026 reached RMB50.4 billion. Four new foreign entities entered the interbank bond market.
Derivatives, bills and the renminbi
TWO
Trading in CGB futures fell 18 percent year-on-year to RMB6.7 trillion, but open interest rose 32.5 percent. The ten-year main contract closed at RMB108.4, up a fraction.
Commercial paper discounting totalled RMB2.4 trillion in February. Small and medium-sized enterprises accounted for 93 percent of issuers and 97 percent of discounters by number.
The onshore renminbi strengthened. USD/CNY closed at 6.8559, a 1.35 percent monthly appreciation. The CFETS RMB Index rose 1.6 percent to 98.58.
Equities edged higher: the Shanghai Composite gained 1.1 percent to 4,163 points, while Shenzhen rose 2 percent. Daily turnover fell 24 percent to RMB2.29 trillion.
Concentrated hands
THREE
The interbank bond market hosted 3,890 institutional investors at end-February. The top 50 holders of corporate credit bonds — mainly large state-owned banks, public funds and insurers — controlled 54 percent of such holdings. The top 200 held 84 percent. Trading concentration ran even higher: the top 50 investors executed 61 percent of all corporate credit bond transactions; the top 200, 91 percent.
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