An aerial drone photo shows visitors enjoying the cityscape at The Stage, a new observation deck atop White Magnolia Plaza in Shanghai, east China, April 14, 2025. (Xinhua/Liu Ying)

As a sweeping sell-off gripped global bond markets recently and rattled investor sentiment over rising energy prices and inflation expectations, China's bond market has remained notably stable, underscoring its emerging role as a resilient haven.

The sell-off in the backdrop of recent geopolitical tensions has sent bond yields sharply higher across advanced economies, including the United States. The selling pressure sent the 10-year U.S. Treasury yield to its highest level in nearly eight months early this week, touching 4.4055 percent on Monday.

The sell-off also hit bond markets of other developed economies. In Britain, the yield on the benchmark government bond once hit a 52-week high last Thursday, along with yield rises in Australia and New Zealand.

The bout of bond volatility in U.S. Treasuries, typically seen as a haven during market turmoil, has highlighted a shifting market dynamic, according to market analysts and investment strategists.

Amid the geopolitical tensions, some global investors, driven by risk aversion, have adopted a "cash is king" strategy, selling off stocks, bonds and commodities, the Shanghai Securities News quoted DBS Senior Investment Strategist Raymond Deng as saying.

Apart from inflation concerns, the sell-off in U.S. Treasuries has also been fueled by markets starting to price in the risk of future interest rate hikes amid surging energy prices, as well as concerns over the staggering U.S. federal debt, which has surpassed 39 trillion U.S. dollars, Deng said.

Bonds are susceptible to risks such as inflation expectations and interest rates. When interest rates rise, bond yields also tend to rise.

While many developed market bonds posted steep losses, China's bond market has moved with relative calm. The yield on China's 10-year government bond stood at around 1.84 percent on Monday, edging only modestly higher from 1.8 percent at the end of February. This moderate increase was a fraction of the volatility seen elsewhere.

Commenting on the stability of China's bond market, Yu Lifeng, executive director of research and development at Orient Golden Credit Rating, has pointed to China's diversified energy structure, which makes the economy less vulnerable to imported inflation driven by higher oil prices.

The analyst added that the Chinese central bank's commitment to a moderately loose monetary policy has also enabled China to avoid the tightening cycle now weighing on Western markets.

Noting the differences in economic fundamentals and policy rhythms, Yu said the low correlation between renminbi (RMB) bonds and their U.S. or European counterparts makes RMB bonds an effective tool for portfolio diversification. "By allocating to RMB bonds, foreign investors can reduce portfolio volatility and improve risk-adjusted returns."

According to the 2025 edition of the Global Public Investor report by the Official Monetary and Financial Institutions Forum, around 30 percent of central banks are expected to increase their RMB holdings over the next decade in reserve asset diversification.

"In the face of frequent geopolitical risks, the safe-haven role of RMB bonds has emerged," Yu said, adding that as the RMB internationalization progresses, demand for RMB assets as reserves is growing, and this is expected to support the growth of RMB bonds holdings by central banks and sovereign wealth funds.