China Rate Markets Signal Cooling Bets on Deflation, PBOC Easing

China’s interest rate markets are indicating reduced expectations for further easing of funding conditions and monetary policy, reflecting renewed economic optimism and lingering concerns about elevated oil prices.

The yield on 30-year government bonds reached an 18-month high this week, after rising for three consecutive weeks. Onshore interest-rate swaps, which are tied to a key gauge of borrowing costs among banks, also rebounded from an 11-month low earlier this month.