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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
CHINA
- Interestingly, China 10Y bond yield, which has constantly been offering a moderate to significant premium over US 10Y yield in the past cycle, has been falling dramatically in the past year and is approaching zero.
- Since its local high at 3.3580% reached in November 2020, China 10Y yield has been constantly testing lower highs as the 'zero-Covid policy' has been significantly weighing on growth expectations.
- China 10Y yield fell back below the 2.8040% level in the end of March, which corresponds to the 61.8% Fibo retracement of the 2.4610% - 3.3580% range. Next support to watch on the downside stands at 2.6730% (76.4% Fibo).
- On the other hand, US 10Y yield has been constantly testing new highs amid rising inflation risks (with market pricing in the Fed behind the curve in its tightening process).
- The US 10Y yield broke above its 2.5650% key level this week (76.4% Fibo retracement of the 0.3140% - 3.26% range) and is currently trading at its highest level since March 2019.
- As a result, China 10Y yield premium has fallen sharply in recent months, from 155bps in early December to 8bps on Friday.
- The last time the ‘premium’ was negative was in May 2010.
- The premium on the 2Y yield (China vs. US) went negative in the end of March following the dramatic surge in US ST rates in the past month.
Source: Bloomberg/MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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