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China 10-year yield near 1.7% bucks global bond selloff
The spread versus US 10-year yields is over 3.5 percentage points, which weighs on the yuan but also supports carry-trade demand and keeps the PBOC relying on capital controls and daily fixing, according to the Wall Street Journal.
China’s 10-year government bond yield has fallen this year to as low as 1.7%, bucking a broader global bond selloff, the Wall Street Journal reported.
The outlet cited a gap of more than 3.5 percentage points between Chinese and US 10-year yields, which keeps downward pressure on the yuan while also making the currency attractive for carry trades.
The report said the People’s Bank of China has leaned on capital controls and its daily fixing to contain yuan weakness, alongside central bank buying that signals Beijing is comfortable with low rates.
It added that the setup points to policy-driven reversal in Chinese bonds being unlikely while the domestic economy remains soft, with China seen as exporting disinflation rather than adding to the global yield surge.