Monetary Policy Transmission via the Bond Market: A US – China Comparison

Abstract

This paper studies how monetary policy passes through the bond market to the real economy, using a structured comparison of the United States and China over 2019–2025. The paper traces the link from policy rates and guidance to expectations at first, and then from term structure to long-term yields and risk premia. The next step is from risk premia to credit conditions and issuance to investment, employment, and inflation. The paper chose two types of typical cases. The U.S. ample-reserves system anchors the short end via IORB, ON RRP, and the SRF while China's MLF and LPR reform provides the price channel to bank lending alongside quantity and structural tools. The analysis applies two empirical lenses. First, the 10-year nominal yield versus CPI year-over-year. Secondly, corporate-bond net financing versus fixed-asset investment. Together these could provide transparent diagnostics. The paper documents that U.S. disinflation did not automatically lower the long end because term premia were elevated and duration supply was ample. By contrast, in China the effectiveness of easing depends on credit-quantity recovery and market plumbing.The paper proposes practical steps, including improving public term-premium estimation and communication, broadening the investor base and hedging toolkit, and coordinating price and quantity levers in order to stabilize transmission.