China’s 30-year government bond auction on Thursday saw an average yield of 1.97% — the highest since March — amid improving market sentiment.

The Ministry of Finance sold 83 billion yuan ($11.6 billion) worth of special sovereign bonds. Traders expect long-term debt supply to rise if China increases spending to support the economy, especially with a possible budget deficit later this year.

Bond futures dropped for the seventh straight session, marking their longest losing streak since April 2023. Yields on 30-year bonds rose to around 1.95%, nearing their highest levels since early April.

Bond market mood weakened further as the People’s Bank of China drained liquidity, pushing the overnight repo rate up by 28 basis points to 1.65% — the steepest jump this year.

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