China’s equities and government bonds have moved in lockstep for the first time
in two years, with the 90-day correlation between the CSI 300 Index and China
Treasury Total Return Index turning positive from March 18, according to data.
The shift reflects China’s relative safe-haven appeal during the US-Iran
conflict, supported by limited exposure to the Middle East shock, policy
support, and liquidity conditions. Chinese onshore stocks gained 4.4% for the
week, while long-end bond yields fell about six basis points. The 10-year yield
rose only three basis points over the period, far less than increases in US,
German, and French yields. Analysts including Citi Securities’ Ming Ming and
ANZ’s Xing Zhaopeng cited renminbi strength, loose liquidity, easing
deflationary pressure, and foreign inflows as drivers, though some warned the
correlation may fade once geopolitical risks ease and domestic weaknesses such
as weak consumption and property downturns resurface.
