China's Central Bank to Add New Metrics to Curb Banks' Long-Dated Bond Holdings

China's central bank is preparing to add new metrics to its Macro Prudential Assessment (MPA) framework in an effort to restrain banks from accumulating excessive long-dated bonds and funds that could amplify investment risks, according to people familiar with the matter.

The proposed measures would also monitor deviations from money market and bond yields, the sources said, speaking on condition of anonymity because the discussions are not public. Specific benchmarks for the metrics remain under discussion with the industry and are subject to consultation, and no final decisions have been made.

The plan comes as China's bond market has rallied through the year, diverging from a global selloff, as weak economic data bolstered expectations of further policy support. On Monday, the 10-year yield stood at 1.68%, close to its lowest level since July 2025, while the 30-year yield was 2.17%. Bond yields and prices move in opposite directions.

The People's Bank of China did not immediately respond to a request for comment.

Market participants said some smaller banks could breach limits on bond investment duration and fund investments, potentially facing pressure to adjust their portfolios.

The MPA framework, formally introduced by the PBOC in 2016, is a central component of China's "dual-pillar" regulatory approach, which combines monetary policy with macro-prudential policy.