China 10-Year Bond Yield Falls to 1.7% as Global Yields Surge on Debt, AI Spending

China's benchmark 10-year government bond yield touched 1.7% on Wednesday, its lowest level this year, diverging from rising yields across major economies. The yield sits more than 3 percentage points below the 5.3% U.S. Treasury note and below comparable U.K., French and Japanese benchmarks. A savings glut and weak consumer spending are driving prices higher and returns lower. Capital controls trap household savings domestically, while a prolonged property slump has eroded real estate's appeal as a savings vehicle, pushing funds into bonds. Chinese banks, facing lackluster loan demand, held 29 trillion yuan (about $4.4 trillion) in bond portfolios by August — more than double the level three years earlier. The People's Bank of China, which in 2024 formulated a bond-selling program to lift yields, has instead been a net buyer this year, signaling Beijing now views lower borrowing costs as useful for struggling economic sectors. Globally, yields have climbed on persistent inflation, heavy government borrowing and an AI-driven investment boom — factors largely absent in China.