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10Y Real Yield Reaches New Lows Amid Surging Inflation

  • China PPI inflation continued to surge in October, coming in higher than expected at 13.5% YoY (vs. 12.3% exp), its highest level since June 1995, up from 10.7% the previous month.
  • Interestingly, China 10Y yield has been barely unchanged, currently trading at 2.90% following its sharp consolidating in the past three weeks.
  • The table below shows that China currently offers the lowest real yield among the EM world (PPI adjusted), at -10.6%.
  • The rise in inflationary pressures, which are expected to remain elevated in the near term, are putting Chinese officials in a difficult position.
  • We have seen that the economic activity has been decelerating sharply since February, therefore easing financial conditions could continue to support inflation in the near to medium term.

Source: Bloomberg/MNI

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