China Bonds Stand Out in Emerging-Market Real-Rate Conundrum
- Slowing inflation boosts China’s allure to global investors
- Negative real rates pervasive across developing economies
A department store in Nanjing, Jiangsu Province of China.
Source: Visual China Group/Getty Images
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China has emerged as the biggest winner in the first set of inflation reports from emerging markets this year, as its bonds lure investors with positive inflation-adjusted returns in a group beset with deepening negative real rates.
Of the 16 developing nations that reported their latest consumer-price indexes in the past week, only four showed a decline, while nine posted an acceleration and three revealed a mixed picture. Among them, China was the only country to boast inflation that’s already well below benchmark borrowing costs and falling faster than expected. That sent the nation’s bonds on the longest weekly rally since 2013.