Economics
China Yield Curve Steepens. Good Sign for Growth? Not Quite
- Lack of sophistication in trading products hampers signals
- Short-dated yields have dropped thanks to liquidity pumping
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As U.S. debates linger about the dangers being flagged by a flattening yield curve, there’s been little cheer about the steepening trend in China’s equivalent.
Ten-year Chinese government bonds yield about 40 basis points more than three-year notes, up from about 30 basis points a year ago. That’s a significantly wider spread than the 18 basis-point premium of 10-year Treasuries over two-year ones, and a similar steepening in a developed market might be interpreted as a bullish sign for the economic outlook. (Under the assumption that interest rates will be higher in future as growth improves.)