Insignia Consultants | China's tumbling bond yields intensify 'Japanification' risks
China's tumbling bond yields intensify 'Japanification' risks
ORLANDO, Florida, Jan 8 (Reuters) - China, the global growth engine for the last 20 years, now boasts lower long-term bond yields than Japan, the former poster child for deflationary economic stagnation. This may signal that the "factory to the world" faces the real risk of "Japanification."
China's bond yields have plunged to their lowest levels on record, with the two-year yield about to break below 1.00%, having been 1.50% only a few months ago. Remarkably, China's 30-year yield recently fell below the Japanese Government Bond (JGB) yield for the first time ever.
That phenomenon looks set to hit the 10-year tenor, with China's bond yield now less than 50 basis points above its JGB equivalent.
It's a situation that would have scarcely been believable to any observer of the global economy over the past 30 years. But here we are.
The collapse in Chinese yields is a reminder that the deflation, bad debt dynamics and troubling demographic trends plaguing Asia's largest economy today are strikingly similar to those that hobbled its fiercest regional rival for three decades
