When wars break out, investors typically sprint toward US Treasuries, gold, and the Swiss franc. This time, they’re also sprinting somewhere less expected: Chinese government bonds.
Since the Iran war escalated with US and Israeli strikes on February 28, 2026, global fund managers have been quietly loading up on Chinese government bonds, or CGBs, treating them as a low-volatility shelter while the rest of the fixed-income world gets tossed around. The 10-year CGB yield has held steady at roughly 1.81%, delivering positive total returns that have outperformed both US Treasuries and JPMorgan’s GBI-EM benchmark during the conflict period.
Why China bonds, why now
The Iran war disrupted shipping through the Strait of Hormuz, sending global energy prices skyrocketing. That creates an inflation problem for most major economies, which pushes bond yields up and prices down. Bad news if you’re holding Treasuries or European sovereign debt.
China, however, sits in a different position. The country maintains significant energy reserves, meaning the immediate supply shock hits it less directly. Domestic inflation remains subdued. And the People’s Bank of China has maintained a dovish monetary policy stance.
