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Scissors unseen for 12 years in China-US returns

China's 10-year bond yield fell below the US 10-year bond yield for the first time since 2010.

Scissors unseen for 12 years in China-US returns

Despite the expectations that the Fed will tighten more aggressively, China's 10-year bond yield fell below the US 10-year bond yield for the first time since 2010, with the pricing that China will maintain its easing policy for a while.

The gap between the two yields saw 20 basis points.

After the aggressive tightening signals from the Fed minutes, a selling wave was seen in US bonds.

After the more hawkish statements of Fed members within the framework of rapid balance sheet shrinkage, the dimensions of the balance sheet shrinkage emerged from the Fed minutes.

In the minutes of the Fed's March meeting, it was signaled that the balance sheet reduction could be made with a maximum of $ 95 billion per month. $35 billion of the shrinkage may be comprised of mortgage-backed securities, and $60 billion of treasury bonds.

In the period between 2017 and 2019, the maximum monthly balance sheet reduction was made at the level of 50 billion dollars. Uninterrupted adherence to the plan will mean that the Fed's balance sheet, which is close to 9 trillion dollars, will shrink by more than 1 trillion dollars a year.

The Federal Open Market Committee is expected to approve this plan at its May meeting and start shrinking.

Fighting the epidemic comes to the fore in China
While the epidemic in China has made its impact on economic activity lately, relaxation policies have come to the fore to support the economy in China, unlike the USA.

The yield premium has dropped by 100 basis points since the start of the year after China's moves.

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