China’s 10-year government bond yield rose to around 1.81% on Monday, rebounding from a nearly seven-month low reached last week, as global inflation concerns intensified on the back of surging oil prices amid escalating conflict in the Middle East. The move was further supported by stronger-than-expected domestic inflation figures: consumer prices increased 1.3% year-on-year in February, the fastest pace in three years and well above both market forecasts and January’s 0.2% gain. The spike was largely driven by robust spending during the extended Lunar New Year holiday.
Rising energy costs also added to inflationary pressures, with oil prices climbing above $100 per barrel as the US-Israeli war with Iran entered its second week with no resolution in sight. Output cuts by several major Middle Eastern crude producers, combined with a continued halt in shipments through the Strait of Hormuz, have heightened global inflation risks and posed a threat to worldwide economic growth. Even so, China, the world’s largest energy importer, is partially shielded from these shocks by its substantial strategic oil reserves.