Current stance vs. future guidance: LLM evidence on how PBC communication shapes the yield curve

We study how central bank communication affects China’s Treasury yield curve. Using large language models (LLM) to quantify the stance and timing orientation of PBC statements, we find that more accommodative statements raise medium-term yields while lowering long-term yields. Decomposing communication shows that current-policy signals increase medium-term premia, whereas future-policy statements induce duration extension that places downward pressure on long-term yields. Future accommodative communication also leads yield declines over the following year. Our results uncover a distinctive cross-maturity substitution mechanism in China’s bond market and highlight the value of text-based measures of communication.