9 July 2024

Chinese government bonds are on fire. That’s ringing alarm bells in Beijing

Laura He

Money is rushing into Chinese government bonds, sending their prices soaring and yields plunging to record lows as investors hunt for a safer alternative to the country’s ravaged real estate market and volatile stocks.

The yield on China’s onshore 10-year government bond, which is a benchmark for a wide range of interest rates, touched 2.18% Monday, the lowest since 2002 when records began. Yields on 20-year and 30-year bonds are also hovering around historic lows. Bond yields, or the returns offered to investors for holding them, fall as prices rise.

Lower borrowing costs should be welcome in an economy struggling to recover from a property crash, sluggish consumer spending and weak business confidence. But the sharp move in bonds is sparking talk of a bubble and triggering acute anxiety among China’s policymakers, who fear a crisis similar to the collapse of Silicon Valley Bank (SVB) last year.

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