China’s bond yields are rising — but economists say deflation worries could soon pull them lower

China’s government bond yields have rebounded recently, but economists believe this does not signal reflation, as deflationary pressure is expected to keep borrowing costs low. The 10-year yield has risen over 30 basis points to 2%, with market optimism exceeding economic reality, as consumer sentiment remains low and credit demand is weak, particularly in the housing market. Despite the sell-off in bonds and rotation into stocks, experts caution that China’s economy is not yet out of the woods.

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