PLW - Chinese Yield Curve Remains Well Behaved Despite Taper Tantrums Elsewhere

• As well as low correlation with G7 yields in recent years, the Chinese 10s/2s yield curve has been more stable than most G7 yield curves in recent years, despite the PBOC not pursuing QE or formal yield curve control (unlike the BoJ).
• Unlike the US, there are few signs of inflation risks having climbed towards the top of investor concerns in Chinese 7-10yr bonds, or market anxiety that the central bank may be in danger of getting behind the inflation curve, which has caused US 10-year yields to rise sharply.
• The period of stability in yields central bank QE purchases and yield curve control can deliver is often ended by periods of high volatility as markets speculate about exit strategies from QE, or increased inflation risks.

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