China-US 10-year bond yield gap hits record 3.17 percentage points without triggering capital flight
Marsh Investment executives state the unprecedented spread between US and Chinese sovereign bonds will not cause major capital flight from China.
The difference between benchmark 10-year US Treasury bonds and equivalent Chinese sovereign bonds reached a record 3.17 percentage points this week. Yields on US Treasury bonds rose to 4.85 per cent, the highest level since 2023, while China's 10-year yield remained at 1.68 per cent. Despite the expanding gap raising fears that higher US returns could drain capital and weigh on the yuan, Marsh Investment executives downplayed these risks during a briefing on Thursday. Global chief investment officer Niall O'Sullivan stated capital flight is not a major impact compared with other forces driving broader moves in the dollar. He attributed elevated long-term US yields to global supply-demand imbalances, expanding national debt, and heavy corporate borrowing across tech and artificial intelligence sectors.
