BEIJING — Chinese government bonds can play an important role in portfolio diversification as they are likely to continue behaving differently from other countries’ debt, strategists say.

China’s yields have edged down in recent months even as benchmarks in the U.S., Japan and the U.K. surged to multi-decade highs. That reflects how the world’s second-largest economy remains insulated from global capital markets — and faces a deflationary environment, in contrast to inflation worries elsewhere.

“We see room for China bonds to outperform developed-market peers on a risk adjusted basis, with supportive macro policies and strong export growth to help support demand for central government bonds,” said Norbert Ling, head of fixed income portfolio management for Asia Pacific at Invesco. “CGB are still providing positive real yields, with defensive characteristics that have a role to play in global bond portfolios.”

China has been dealing with a severe property-market downturn and deflation, which has kept the People’s Bank of China accommodative. The country on Monday reported disappointing retail sales and industrial production growth for July, fueling hopes for more rate cuts and stimulus. That is likely to keep its bonds on a different path from those of other major markets.

“The latest July macroeconomic activity data from China came in weaker than market expectations, suggesting that domestic demand may take longer to recover,” said Chun Lai Wu, head of Asia asset allocation at UBS GWM Chief Investment Office. “We expect the PBoC to remain supportive through liquidity operations and targeted credit measures”

Chinese government bonds offer “valuable diversification benefits within a strategic multi-asset portfolio” for global and Asian investors, Wu added.

Charu Chanana, chief investment strategist at Saxo, agrees. Other major central banks like the European Central Bank and Bank of Japan have been hiking interest rates.

“For global portfolios, CGBs can still play a diversification role because China’s rate cycle is increasingly distinct from the U.S., Europe and Japan,” she said in an email.

The outbreak of the Iran war sparked a sharp sell-off across most regions and asset classes in March, as investors weighed the impact the conflict would have on inflation and economic output. China proved to be an exception.

Despite its status as one of the world’s major oil importers, China averted the worst of the energy shock caused by the effective closure of the Strait of Hormuz thanks to multi-year efforts to diversify its energy mix and build up reserves.

Its stockpile of over 1.2 billion barrels of oil and diverse mix of energy resources, such as coal, renewables and LNG, made it less vulnerable to upheaval in the Persian Gulf, through which 9% of global oil supply passes.

“Much of the low correlation observed from its capital markets in the last few weeks surely comes from the fact that, as the world’s largest oil importer, it has been thinking strategically about a war for some time,” Julian Howard, chief multi-asset investment strategist at Gam, told CNBC over email.

China’s relative insulation from the conflict could have its roots in the first trade war between the U.S. and China in 2018 during U.S. President Donald Trump’s first term in office, according to Peter Boockvar, chief investment officer at One Point BFG Wealth Partners.

“Back then, Trump punched China in the face, and what’s happened since then is China started going to the gym, and they started to become more resilient and independent,” he told CNBC. 

“Our attempt to limit their access to our technology just encouraged them to develop it themselves.”

Gold, silver and platinum resumed their recent sell-off this week, falling sharply as investors continue to retreat from precious metals as a safe haven trade amid the ongoing war in Iran.

The price of spot gold was seen 7.8% lower shortly after 7:30 a.m. in London (3:30 a.m. ET) on Monday, at $4,126.36.80.

Gold futures were down almost 10% at $4119.10, the lowest level seen so far in 2026.

The precious yellow metal lost almost 10% last week in its worst showing since September 2011. Spot gold has now lost around 25% since hitting a record high of $5,594.92/oz at the end of January.

Spot silver, meanwhile, was down 8.3% at $62.24, a year-to-date low and almost half of its $117 level on Feb. 28, when the Iran war began. Silver futures were trading 11.7% lower on Monday at $61.66.

The sell-off extended to other precious metals, with platinum futures plummeting 10.6% to $1,760.90, while palladium dropped 6.7% to $1,347.50.

The retreat from gold — which is traditionally seen as a key safe haven asset in times of market turmoil — chimes with the ongoing risk-off sentiment in markets as the Iran conflict fuels concerns over inflation and rising energy prices.

The prospect of higher interest rates as a result of the war could boost government bonds among investors, at the expense of non-yielding precious metals, market strategists told CNBC recently.

However, euro zone government bond yields were once again moving higher in early trading on Monday as the conflict’s latest escalation left few hiding places for investors.

Ask an investor to name safe-haven currencies, and most will say the U.S. dollar, the Swiss franc, and the Japanese yen.

Investors historically expected them to hold their value during geopolitical or economic turbulence.

But more recently, these currencies have experienced volatility themselves. The dollar and yen saw sharp declines over 2025 and into 2026. The franc has strengthened, but this is challenging for a country with unusually low inflation and a reliance on exports.

U.S. President Donald Trump reordered global trade with tariffs in 2025, sparking a “sell America” trade: a sell-off of U.S. assets, including the dollar, the world’s reserve currency.

The suddenness with which other tariffs have been imposed and withdrawn kept the pressure up.

In a December note, Swiss private bank Julius Baer stated that “erratic trade policies” were just one cause of the dollar’s woes, adding that Trump’s “One Big Beautiful Bill Act” put the U.S. on “an unsustainable debt trajectory.”

Trump’s pressure on U.S. Federal Reserve chair Jerome Powell also undermined investors’ confidence in the dollar, the note said.

The dollar index, which tracks the greenback against a basket of peers, tumbled 1.3% on Jan. 29 after Trump said the dollar is “doing great,” its sharpest drop in a day since Trump first announced tariffs in April. It took the greenback to its lowest level in almost four years.

The index plunged 9.37% in 2025, and it has fallen further in 2026.

In a Wednesday note, George Saravelos, head of FX research at Deutsche Bank, said the dollar’s safe-haven status was “myth.”

He challenged the notion that the dollar “rallies during risk-aversion,” adding: “A simple chart of the dollar-equity relationship shows this not to be true. The average USD-equity correlation has historically been closer to zero, and over the last year the dollar has once again de-correlated from the S&P.”

Cole Smead, CEO and portfolio manager at Smead Capital Management, told CNBC’s “Squawk Box Europe” at the end of January that he sees further weakness ahead for the dollar.

“We’re in a dollar bear market longer term,” he said. “If you go back and look at these ‘American manias’ [in markets], if you go back and look at the telecom bubble and tech bubble the late 1990s, the dollar peaked in 2002 and within six years, you saw the dollar go to a low it hadn’t seen for [a] very, very long time.”

The U.S. dollar index nosedived by around 41% between 2002 and its 2008 low.

Bitcoin rallied on Friday to within striking distance of its record high as the U.S. government’s shutdown entered its third day.

The world’s oldest cryptocurrency is trading up roughly 2% on the day at $123,874. That’s about 1% below its all-time high price of just north of $124,000 that it reached in mid-August.

Investors are flocking to the decentralized asset after U.S. lawmakers failed to strike a deal on federal funding, forcing the U.S. government to shutdown on Wednesday. Bitcoin is up 12% this week alone.

“The shutdown matters this time around,” wrote Standard Chartered’s Geoff Kendrick. “During the previous Trump shutdown (22 Dec 2018 to 25 Jan 2019) Bitcoin was in a different place than now, so it did little.”

“However, this year bitcoin has traded with ‘US government risks’ as best shown by its relationship to US treasury term premium,” added Kendrick.

Standard Chartered expects a new high soon and ultimately the crypto hitting $135,000 after that.

Traders are turning to crypto and other assets to hedge against mounting political and economic tensions. Spot gold rose 0.5% to $3,876.55 per ounce on early Friday, with prices gaining more than 2% this week.

Traders also poured some money into stocks on Friday, despite the increasing geopolitical uncertainties. The S&P 500 and Nasdaq Composite also rose .5% and .27% on the day, respectively.