Chart of the Week
Long-term government bond yields are rising across the globe except in China, where declines since the start of the year have led to all-time lows. Having slipped below 2.30%, China’s 10-year government bond yield is in a unique position as it now sits below the trough reached in spring 2020.
OUR ANALYSIS
The widening yield gap between China and the rest of the world, not least the US, could put downward pressure on its currency, especially as capital inflows fall off significantly.
While low Chinese yields contrast with solid first-quarter growth of 5.3% (year on year), China’s inflation rate remains close to zero and significant challenges in the property sector are hampering its growth outlook. The situation underscores how isolated China’s financial system is from the rest of the world and how little it is affected by global finance.
This tendency to buck global trends heightens the need to closely monitor the Chinese economy.
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Written on April 26, 2024. This is not an investment advice. Opinions subject to change.
See also: https://latribune.lazardfreresgestion.fr/en/europe-and-us-policy-paths-to-diverge/
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