This website collects cookies to deliver better user experience. Cookie Policy
Accept
Sign In
The Wall Street Publication
  • Home
  • Trending
  • U.S
  • World
  • Politics
  • Business
    • Business
    • Economy
    • Real Estate
    • Markets
    • Personal Finance
  • Tech
  • Lifestyle
    • Lifestyle
    • Style
    • Arts
  • Health
  • Sports
  • Entertainment
Reading: China’s Yield Advantage Over U.S. Bonds Narrows
Share
The Wall Street PublicationThe Wall Street Publication
Font ResizerAa
Search
  • Home
  • Trending
  • U.S
  • World
  • Politics
  • Business
    • Business
    • Economy
    • Real Estate
    • Markets
    • Personal Finance
  • Tech
  • Lifestyle
    • Lifestyle
    • Style
    • Arts
  • Health
  • Sports
  • Entertainment
Have an existing account? Sign In
Follow US
© 2024 The Wall Street Publication. All Rights Reserved.
The Wall Street Publication > Blog > Markets > China’s Yield Advantage Over U.S. Bonds Narrows
Markets

China’s Yield Advantage Over U.S. Bonds Narrows

Editorial Board Published January 21, 2022
Share
China’s Yield Advantage Over U.S. Bonds Narrows
SHARE

The extra yield that Chinese government bonds offer over U.S. Treasurys this week dropped below a percentage point for the first time in nearly three years, as the central banks of the world’s two largest economies move in opposite directions.

The narrowing gap, reflecting both a rally in Chinese bonds and a U.S. selloff, reduces one longstanding argument in favor of foreign investors buying more Chinese debt. But analysts and investors say the long-term torrent of international money pouring into Chinese fixed-income markets is likely to continue.

Chinese sovereign bonds have gained in price as Beijing eases policy to support a slowing economy. That has pushed down yields, which move inversely to prices, with the yield on the benchmark yuan-denominated 10-year bond dropping to 2.72%.

At the same time, investors are bracing for a string of interest-rate increases from the Federal Reserve to combat rapid inflation. That has helped lift the yield on the 10-year Treasury note, which stood at about 1.79% on Friday afternoon Hong Kong time.

U.S. inflation, as measured by the consumer-price index, hit an annual rate of 7% in December, the highest level in nearly four decades. For the same month, China’s CPI rose 1.5%.

“In China, growth is slowing; inflation is low; policy makers are easing. In the U.S., you have the economy growing, inflation running well above target, and the Fed getting on with normalizing monetary policies,” said Ashish Agrawal, the Asia head of foreign-exchange and emerging markets macro strategy research at Barclays.

“For a bond investor, China bonds are a much safer proposition than U.S. fixed income,” he said.

In addition, most foreign buyers are central banks, sovereign-wealth funds and large China-dedicated funds and are unlikely to be deterred by a shrinking yield spread, Mr. Agrawal said.

This week, the People’s Bank of China cut some key rates, including the one- and five-year loan prime rates, and said it would act early and forcefully to help stabilize the economy this year.

China has moved into “outright easing” mode—and has become the only major bond market where yields have dropped so far this year, said Andre de Silva, head of global emerging markets rates research at HSBC.

Analysts and investors expect the yield gap—which was last below 1% in May 2019—to shrink more in the coming months, as China eases policy further and the U.S. scrambles to fight inflation.

The Federal Reserve says it will accelerate the wind-down of its bond-buying program, the biggest step the central bank has taken in reversing its pandemic-era stimulus. Here’s how tapering works, and why it sends markets on edge. Photo illustration: Adele Morgan/WSJ

A key draw for many bondholders is the diversification offered by Chinese debt, which typically doesn’t move in tandem with American or global equivalents. Some investors say it is also important to look at the real, or inflation-adjusted, interest rates on offer in different markets, rather than focusing solely on nominal yields, which don’t take into account how rising prices erode purchasing power.

Chinese bonds still offer a positive real yield, said Brad Gibson, co-head of Asia-Pacific fixed income at AllianceBernstein. “The same cannot be said for the U.S. Treasury,” he said. The yield on 10-year U.S. inflation-protected securities stood at negative 0.5% as of Thursday, Refinitiv data showed.

Foreign holdings of Chinese government debt rose to a record 2.5 trillion yuan, the equivalent of about $394 billion, in December, according to the China Central Depository & Clearing Co. Ownership has risen steadily in recent years as Beijing has made it easier to invest in the market and index providers have added Chinese debt to their gauges.

Robust demand for Chinese bonds and stocks—and surging exports—have helped support the yuan, even though easier monetary policy would typically lead to a weaker currency. The yuan was trading at about 6.35 to the dollar in offshore markets on Friday.

Flows into Chinese government bonds have picked up in recent weeks as investors have sought shelter from the Treasury-market selloff, said Becky Liu, head of China macro strategy at Standard Chartered Bank. Investors are typically bearish on bonds when global central banks are tightening, she said.

“Therefore, for those who cannot really reallocate from fixed income into something else, Chinese government bonds become a safe haven because the People’s Bank of China is the only dovish central bank this year,” Ms. Liu said.

Write to Rebecca Feng at rebecca.feng@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

TAGGED:MarketsPAIDWall Street Publication
Share This Article
Twitter Email Copy Link Print
Previous Article The SPAC Ship Is Sinking. Investors Want Their Money Back. The SPAC Ship Is Sinking. Investors Want Their Money Back.
Next Article The Bathroom of the Future Is Here: From High-Tech Toilets to Self-Filling Tubs The Bathroom of the Future Is Here: From High-Tech Toilets to Self-Filling Tubs

Editor's Pick

TLI Ranked Highest-Rated 3PL on Google Reviews

TLI Ranked Highest-Rated 3PL on Google Reviews

EXTON, PA — Translogistics, Inc. (TLI), a trailblazer in the 3PL and managed logistics space since its founding in 1994,…

By Editorial Board 12 Min Read
Justin Baldoni Shares Emotional Message Amid Blake Vigorous Lawsuit
Justin Baldoni Shares Emotional Message Amid Blake Vigorous Lawsuit

Studying Time: 3 minutes Justin Baldoni has damaged his silence. In a…

5 Min Read
McDonald’s to rent as much as 375,000 staff this summer time
McDonald’s to rent as much as 375,000 staff this summer time

Brian Vendig, MJP Wealth Advisors President, and Ryan Payne, 'Payne Factors of…

6 Min Read

Oponion

FAA sheds workers as planes preserve crashing—however welcomes SpaceX staffers

FAA sheds workers as planes preserve crashing—however welcomes SpaceX staffers

President Donald Trump’s administration has begun firing tons of of…

February 17, 2025

Chinese Drone Giant DJI Suspends Business in Russia, Ukraine

HONG KONG—China’s SZ DJI Technology Co.,…

April 27, 2022

5 tales from 2024 on what it means to stay within the Bay Space

A few of our most-read tales…

December 30, 2024

31 Finest Self-Care Items for Males Who Want Pampering in 2025 | Fashion

Males's Grooming Males's Life-style We independently…

May 3, 2025

The Washington Hilton’s decades-long historical past with D.C. politics

Washington — Contained in the kitchen…

April 27, 2025

You Might Also Like

Verizon ends DEI applications, range targets because it seeks approval for Frontier acquisition
Markets

Verizon ends DEI applications, range targets because it seeks approval for Frontier acquisition

Azoria CEO James Fishback discusses corporations rolling again their DEI initiatives on ‘The Bottom Line.’ Verizon Communications on Friday mentioned…

4 Min Read
Chili’s throws severe shade at TGI Friday’s over mozzarella stick dig
Markets

Chili’s throws severe shade at TGI Friday’s over mozzarella stick dig

TGI Fridays CEO explains how the corporate is making a comeback after submitting for chapter in 2024. Two widespread restaurant…

5 Min Read
Coinbase estimates cyberattack might value crypto trade as much as 0M
Markets

Coinbase estimates cyberattack might value crypto trade as much as $400M

Coinbase’s chief authorized officer Paul Grewal discusses how the U.S. Securities and Alternate Fee has stated it intends to drop…

3 Min Read
UnitedHealth shares slide as prison probe report provides to investor fears
Markets

UnitedHealth shares slide as prison probe report provides to investor fears

Palumbo Wealth Administration CEO & CIO Philip Palumbo discusses UnitedHealth Group market developments and extra on ‘The Claman Countdown.’ UnitedHealth…

3 Min Read
The Wall Street Publication

About Us

The Wall Street Publication, a distinguished part of the Enspirers News Group, stands as a beacon of excellence in journalism. Committed to delivering unfiltered global news, we pride ourselves on our trusted coverage of Politics, Business, Technology, and more.

Company

  • About Us
  • Newsroom Policies & Standards
  • Diversity & Inclusion
  • Careers
  • Media & Community Relations
  • WP Creative Group
  • Accessibility Statement

Contact

  • Contact Us
  • Contact Customer Care
  • Advertise
  • Licensing & Syndication
  • Request a Correction
  • Contact the Newsroom
  • Send a News Tip
  • Report a Vulnerability

Term of Use

  • Digital Products Terms of Sale
  • Terms of Service
  • Privacy Policy
  • Cookie Settings
  • Submissions & Discussion Policy
  • RSS Terms of Service
  • Ad Choices

© 2024 The Wall Street Publication. All Rights Reserved.

Welcome Back!

Sign in to your account

Lost your password?