China yield on longer-term bonds have fallen below that on shorter-term debts, a signal that deleveraging in nation starts to pressure nation’s growth, such environment does not favour the Aussie dollar, Fullerton Markets analysis shows.
- Its 5-year yield rose to 3.71% earlier, breaking above 10-year yield for the first time since records began.
- Inverse yield curve reflects investors’ expectation on growth and inflation to edge lower.
- When U.S. Treasury yield curve inverted in 2007, country falls into financial crisis one year later.
- Chart below shows that AUD/USD has been moving in line with China GDP growth in past 10 years.
- We continue to be bearish on AUD/USD, targeting 0.73 in near term.
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Fullerton Markets Research Team
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