Chinese onshore banks and funds have flocked to government bonds amid a gloomy economic outlook as hopes for meaningful policy push fade.
Chinese commercial bank have flocked to buying government bonds as Beijing's stimulus push has failed to spur consumers loan demand.
"The lack of strong consumer and business loan demand has led the capital flows into the sovereign bonds market," said Edmund Goh, investment director of fixed income at abrdn in Singapore. For this year, authorities have vowed to make boosting consumption a top priority and to revive credit demand with lower corporate financing and household borrowing costs.
The widening yield differentials between Chinese and U.S. sovereign bonds could risk encouraging capital outflows and put further pressure on the yuan that has been weakening against the greenback.
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