In addition, China’s central bank in July released 700 billion yuan in liquidity by scaling back the reserve requirements of certain banks. Economists have not ruled out that further reserve requirement reductions could occur this year to help stimulate economic growth.

As investors sold off Chinese bonds, the country’s stock markets edged higher on the prospect that policy easing will take place. The Shanghai Composite index .SSEC and the blue-chip CSI300 index .CSI300 both closed up 1.6 percent.

High-Yield Fixed-Income ETFs Rise

Meanwhile in the U.S., as investors brace themselves for more interest rate hikes this year, they’ve pulled out of the yuan in addition to other global currencies. The spread between 10-year Chinese and U.S. Treasuries narrowed to 19-month lows on Thursday.

Meanwhile, high-yield fixed income ETFs got a boost–ProShares High Yield—iShares Interest Rate Hdg Hi Yld Bd ETF (NYSEArca: HYGH) was up 0.15%, SPDR Blmbg BarclaysST HY Bd ETF (NYSEArca: JNKwas up 0.13% and iShares iBoxx $ High Yield Corp Bd ETF (NYSEArca: HYGwas up 0.23%.

Related: Are China ETFs Oversold?

For more trends in the fixed income space, visit the Fixed Income Channel