Hedge funds are increasing their exposure to long-dated Chinese government bonds as a deepening equity market selloff drives investors towards fixed income assets, with 30-year Treasury bond ETFs attracting $2.1bn in net inflows during October, according to a report by Bloomberg.

Two major onshore ETFs tracking 30-year Chinese government bonds recorded combined inflows of 13.8bn yuan in October, their highest since July 2025. The surge pushed both funds to record market capitalisations, with the Pengyang ChinaBond 30-year Treasury Bond ETF and Bosera SSE 30-Year China Treasury Bond ETF expanding by 57% and 68% respectively since the start of the second half.

Demand has been supported by moderate economic growth, ample liquidity and limited investment alternatives as Chinese equities entered bear market territory in October. Weak consumer spending and concerns over AI-related profitability have contributed to the stock market downturn, while government bond yields have fallen towards historic lows.

Hedge fund participation has also increased in China's government bond futures market, with open interest in 30-year contracts reaching a record high. Meanwhile, yields on five- and seven-year government bonds fell to record lows, while the benchmark 10-year yield stood at approximately 1.62%.

Analysts expect further potential gains in long-dated debt, with Huayuan Securities forecasting that 30-year government bond yields could decline towards 2% by year-end from around 2.05%, supported by lower borrowing costs and reduced bond issuance.

However, concerns over debt repayment difficulties at state-owned conglomerate Zhuhai Huafa have introduced fresh risks, with investors warning that potential fund redemptions could trigger broader selling pressure across China's bond market.