Chinese bond yields fall below 2% for first time as deflation intensifies and dollar surges following Trump’s victory

Chinese government bond yields fell below 2% for the first time, underscoring growing concerns about deflation in the world’s second-largest economy as the dollar hits new highs amid a different economic trajectory.

what happened: China’s benchmark 10-year government bond yield fell 1.5 basis points to 1.598%, and the 30-year government bond yield fell 2.9 basis points to 1.819%. China’s central bank is considering cutting interest rates this year as policymakers grapple with ongoing deflationary pressures, according to the Financial Times.

since being elected president Donald TrumpAfter the election victory, market dynamics changed significantly. The U.S. dollar index surged to 109.4, its highest level since October 2022, rising 5.54% since November 5.

The yuan has fallen to 7.30 against the dollar, down 2.82% since early November, exacerbating Beijing’s economic challenges. Chinese stocks continued their downward trend, with the CSI 300 index falling 0.18% on Friday, while other markets in Asia rose.

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why it’s important: my country’s deflationary pressure is particularly prominent. Producer prices have fallen for 26 consecutive months, with an annual decrease of 2.5% in November. This has created a challenging environment for manufacturers, forcing many to cut prices amid overcapacity and weak demand.

The U.S. market also started 2025 with caution, with the Dow Jones Industrial Average falling 0.36% to 42,392.27 points, the S&P 500 Index falling 0.22% to 5,868.55 points, and the Nasdaq Composite Index falling 0.16% to 19,280.79 points.

Japan’s 10-year government bond yield edged up to 1.09%, near a 13.5-year high of 1.11%, reflecting the country’s continued battle with inflation – in stark contrast to China’s battle with deflation.

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Disclaimer: This content is generated in part with the help of artificial intelligence tools, and is reviewed and published by Benzinga editors.