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Record Yield Premiums Drive Faster Yuan Gains: China Credit

The yuan is strengthening at the fastest pace in three months as Chinese bonds’ near-record yield premiums over U.S. Treasuries draw funds from abroad.

The currency rose 0.41 percent versus the dollar in the last two weeks, its best performance since the period ended May 1, according to the China Foreign Exchange Trade System. The difference in yields between China’s five-year notes and comparable U.S. government debt was at an all-time high of 258 basis points as of 12:11 p.m. in Shanghai, while the gap for 10-year bonds was a record 144 basis points, based on Bloomberg data going back to June 2005.