China's 10-year bond yield drops to 1.7%, defying global rise

China's 10-year government bond yield touched 1.7%, marking its lowest point this year and standing well under yields in the United States, the United Kingdom, France and Japan. The decline reflects a massive pool of savings trapped by capital controls and a sluggish economy, where consumer spending and property investment remain weak. With few alternative assets, savers pour money into bonds, raising prices and suppressing yields.

Chinese banks have built bond portfolios to roughly 29 trillion yuan, more than double the amount three years ago, further driving the trend. The People's Bank of China, after planning a bond-selling program in 2024, has become a net buyer this year, signaling a policy shift to keep borrowing costs low. Analysts warn that persistently low yields could dampen consumption and signal weak growth expectations for firms.