Either China's Bond Market Or Metals Are Getting It Wrong
- Analysts split on whether metals gains will stoke inflation
- Debt prices will need to decline, First Capital’s Shen says
QINGTIAN COUNTY, CHINA - MAY 6: (CHINA OUT) A worker covers the steel slag poured on the ground with sandy soil at a stainless steel factory on May 6, 2008 in Qingtian County of Zhejiang Province, China. According to China Iron and Steel Association, pushed by high demand, domestic steel prices surged by almost 20 percent in the first quarter. Since more steel products are required for China's rapid urbanization and booming real estate industry, the gap between demand and supply will most likely be further widened.
Photographer: China Photos/Getty ImagesChina’s surging commodity prices are sending a warning signal on inflation. That should be negative for bonds, but the debt market seems unruffled.
As futures on steel reinforcement bars surged to their highest level since 2013 in Shanghai last week, joining copper and aluminum at multi-year highs, bonds barely registered. A Bank of America index of the Chinese debt market was little changed, continuing a trend that’s left it steady in the quarter, even as commodity prices look to be stirring.