What if falling Chinese bond yields open a negative-spread gap in life insurers' legacy policies?
Falling Chinese bond yields leave life insurers unable to earn the high guaranteed rates on legacy policies, opening a negative-spread gap that erodes capital, a risk the PBoC/NFRA have flagged.
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The butterfly cascade
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What it would mean
If this plays out, it is a risk-off shock. Falling Chinese bond yields leave life insurers unable to earn the high guaranteed rates on legacy policies, opening a negative-spread gap that erodes capital, a risk the PBoC/NFRA have flagged. The trigger decomposes into signed root‑shocks — China growth ▼ · Credit spreads ▲ · Real yields ▼ · Risk appetite ▼ — which propagate through our causal graph to the markets below.