Yields in most global markets rose last month on oil, inflation and war risks – but China yields and spreads are still declining steadily. What's going on? Has China become like a global "safe haven" market?

Ahem, no. China is not a safe haven market ... it's simply a closed market, with near-hermetic capital controls that effectively wall it off from global liquidity and sentiment swings. As a result renminbi yields only reflect what's happening at home. And at home there are two crucial trends that matter.

The first is a redoubled PBC liquidity "put" that pushes rates lower. Both average rates and particularly rate volatility have continued to fall at the front end of the interbank market in recent quarters, reflecting an ever-expanding PBC liquidity net that keeps the entire financial system stable.

And the second is the unabated household savings "glut" holding down yields and spreads. Exports and public investment outlays may have boomed in the first quarter, but consumer spending is still as weak as ever, with no turnaround in the ongoing property market decline and moribund consumption indicators. As a result, there's still a huge glut of household savings deposits hitting the financial system.