What Is the Chinese 10-Year Bond Yield Telling Us?
It might be time for U.S. investors to pay attention.
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A friend in the business with contacts in Asia sent me a memo pointing out that China's 10-year government bond (CGB10Y) made a low yield last night, 2.13%, and had its biggest one-day decline this year of 5 pbs. (See the chart below.)
Stock market people in the U.S. do not pay much attention to the CGB10Y, or only as an afterthought. A declining bond yield is a bearish view on the economy and suggests a deflationary funk.
So-called sophisticated investors have been anticipating an economic recovery in China for months now and equities remain in a downward trend.
Bottom-line strategy: Equity traders in the U.S. seem to watch every basis point move in the 10-Year Treasury but why not the elephant in the room?
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