Chinese government bond yields have climbed to their highest since November, with yields on 30-year Chinese government bonds rising 0.08 percentage points on Wednesday to 2.21%, and ten-year yields up 0.03 percentage points to 1.82%, their highest level since just before US President Donald Trump’s “liberation day” tariff announcement in April.
The rise could suggest that investors are shifting into equities in spite of the fact that the economy is not doing well. This reminds us of the phrase “irrational exuberance” used by then-Federal Reserve Board chairman, Alan Greenspan, in a December 1996 speech during the dot-com bubble.
Greenspan suggested that irrational exuberance had unduly escalated asset values, and this could well be the case here, with the infectiousness of a drive, driven in part by state-related investors, now proving attractive to retail investors as well. But we are yet to see whether this drive is truly based on any fundamental changes in the economy, which at the moment is still looking a long way from recovery.