The Chinese 10-year bond yields fell to seven-year low of 2.71 percent Thursday on expectations of lower inflation and persistent sluggish economic growth, creating pressure on the PBoC for a further innovative monetary policy easing.

The 10-year treasury yield fell 1 basis point to 2.71 percent, the yield on super-long 30-year bond dipped 1/2 basis point to 3.268 percent and the yield on short-term 3-year note slid 1 basis point to 2.373 percent by 07:00 GMT.

On Tuesday, China's CPI inflation eased to 1.8 percent y/y in July, in the line of market expectations of 1.8 percent y/y, as compared to 1.9 percent y/y in June as food inflation moderated to 3.3 percent y/y in July from 4.6 percent y/y in June. This print lost the momentum for third straight month, putting it further below the government target of 3 percent for the year.

Additionally, China's PPI declined for a 53rd consecutive month by 1.7 percent y/y in July, against market consensus of -3.2 percent y/y, after -2.6 percent y/y reading seen in June.

According to China’s state information centre researchers, fiscal year 2016 inflation is projected to come in at 2.0 percent y/y, while PPI is seen falling by 2.7 percent y/y. Similarly, retail sales growth is expected to slow down in second half of 2016 due to downward economic pressure.

Meanwhile, China sets the USD/CNY reference rate at 6.6255, 0.41 percent stronger than 6.6530 yesterday. The Shanghai Composite (SSEC) tumbled 0.53 percent to 3,002.64.