China’s 10-year government bond yield held steady at around 1.76% on Monday, remaining at a one-week high as investors digested strong economic data while staying cautious amid prolonged Middle East tensions. Iran reportedly proposed to the US reopening the Strait of Hormuz, following stalled weekend efforts to restart talks. While earlier signs of de-escalation had triggered risk-on reactions, markets now appear more cautious, with optimism fading quickly after repeated diplomatic signals fail to deliver concrete progress. Domestically, industrial profits rose 15.5% year-on-year in Q1 2026, from 15.2% in the January–February, highlighting the continued resilience of China’s industrial sector despite external risks weighing on the global outlook. Early signs of stabilisation in producer prices are also emerging after more than three years of deflationary pressure, easing cost pressures for industrial firms that have faced squeezed margins due to input cost swings and weaker demand.

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