US/China trade war continues to have an impact on bond yields, while Chinese authorities are under pressure to maintain the currency to protect the local economy and avoid a global shock. Core inflation has declined significantly and on the credit side issuance has fallen in May.
The local credit market has been booming this year and, following a quiet 2018, demand for inflation-linked bonds is also on the rise. The increased demand for these bonds also contributed to an increase in the breakeven inflation rate.
Central banks’ dovish stance boosts asset prices, while local bonds should benefit from low global yields
Central banks globally have turned dovish. This supports financial conditions, which, in turn, boosts asset prices. With global bond yields falling, investors will start looking for higher-yielding assets.
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