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China’s Policy Easing Risks Upending Tentative Return of Inflows

  • Strong comeback of China bond inflows looks unlikely: OCBC
  • Credit Agricole sees yields falling further on weak growth
A public screen displaying commodity prices in Shanghai.
A public screen displaying commodity prices in Shanghai.Photographer: Qilai Shen/Bloomberg

China’s surprise policy easing is a double-edged sword for the nation’s sovereign bond market.

On the bright side, it creates opportunities for capital gains for investors who foresee more easing and suggests China is a reliable destination for diversification. On the other hand, persistently loose policy could deepen the country’s interest-rate discount to the US, complicating the picture of capital flows.