SHANGHAI, July 25 (Reuters) - China's ultra-long-dated

government bond futures are poised for their steepest weekly

decline in 10 months, implying higher bond yields, as a rally in

equity and commodity markets drew investors' interest away from

the safety of fixed income.

Chinese 30-year treasury futures for September 2025 delivery

were down nearly 2%, set for the biggest weekly loss

since September 2024, while 10-year futures dropped

0.5%.

The jump in yields, owing to the drop in bond prices, came

after top leaders pledged this month to step up regulation of

aggressive price-cutting by Chinese companies, as the world's

second-biggest economy struggles to shake off persistent

deflationary pressures.

The Shanghai Composite Index rose above 3600 points

this week, the highest level since October 2024.

"The recent surge in commodity prices, driven by supply-side

constraints, has sparked a short-term shift in risk appetite and

raised concerns that the central bank may turn more attentive to

inflation. This could cause some near-term volatility in bond

yields," said analysts at Caitong Securities.

The most active China coking coal contract was up

more than 30% this week.

However, Caitong analysts said without a concurrent rebound

in aggregate demand, such price increases were unlikely to be

sustained, and monetary policy tightening remained unlikely.

Until this week, yields on China's sovereign bonds had

hovered near record lows for much of the past month, supported

by mixed economic data and persistent policy easing

expectations.

Bond funds are facing mounting redemption pressure. On

Thursday, bond mutual funds saw their largest single-day outflow

since September 2024, according to Huaxi Securities.

Ten-year and 30-year bond yields

were up 7 basis points and 7 bps this week, respectively, to

1.73% and 1.96%.