Small and Medium Banks Play Their Own Cards Amid Bond Market Volatility

MetaMuskRat · 2026-03-18T00:54:50+00:00

This year, the banking sector continues to exhibit a pattern of "major banks extending credit while smaller banks purchase bonds." Mid-sized and smaller banks' bond allocations are gradually diverging, with some purchasing long-term bonds while others focus on short-end varieties to cope with net interest margin compression and funding pressures. This strategy can activate idle funds and balance yields.

MetaMuskRat

2026-03-18 00:54:50

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People’s Financial News, March 18 — A survey found that since the beginning of this year, the pattern of “big banks lending, small banks buying bonds” still exists in the banking industry. However, in the volatile bond market environment, the bond allocation strategies of small and medium-sized banks are gradually diverging: some small and medium-sized banks are heavily purchasing long-term bonds, while others focus on short-term products and adopt a cautious approach. Industry insiders believe that the recent increase in allocation to medium- and long-term bonds by small and medium-sized banks is a passive response to the narrowing net interest margin and the “asset shortage” environment. They extend durations to boost yields, aiming to alleviate short-term profit pressures and capital accumulation issues. “In the context where effective credit demand has not fully recovered, allocating long-term bonds is a better way to activate idle funds and balance returns,” said a business manager at a rural commercial bank in East China. (China Securities Journal)

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