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China, US bond markets diverge as Warsh strikes hawkish tone at Jackson Hole
Strong momentum is predicted to drive the yield on China’s 10-year government bonds to a low of 1.65 per cent, according to analysts
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Zhang Shidongin Shanghai
The divergence of the bond markets in China and the US risks widening further, as economic data releases from the world’s second-largest economy remained underwhelming and Federal Reserve chairman Kevin Warsh’s hawkish tone and concerns about fiscal sustainability add to the headwinds for Treasuries.
The yield on China’s 10-year government bond traded at 1.692 per cent on Monday, approaching its lowest rate in a year after a set of economic figures from July trailed analysts’ estimates. Brokerages such as Great Wall Securities predicted that strong momentum would drive the yield to a low of 1.65 per cent.
In the US, the 30-year yield was wavering near a two-decade high of 5.304 per cent, with investors continuing to demand the so-called term premium even after Treasury Secretary Scott Bessent said he would double a buy-back programme to rein in the bond rout.
Warsh’s surprisingly hawkish comment at the Jackson Hole symposium on Friday came as the latest frustration for Treasuries. The front-end yields rose immediately after Warsh focused his speech on restoring price stability, implying policy priority of inflation over employment.
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