The recent flattening of China’s yield curve has raised concerns about the nation's economic future. The People’s Bank of China (PBOC) halted its bond-buying program in January 2025, contributing to a rise in short-term interest rates. This move was primarily aimed at stabilizing the yuan and controlling inflation, but it also tightened liquidity, impacting both businesses and consumers. As the gap between short-term and long-term bond yields narrows, the market speculates about the PBOC's next steps. Analysts predict that the central bank may resume bond purchases later in 2025 to address liquidity concerns and prevent further economic slowdown. This action reflects broader issues such as weak inflation, sluggish credit demand, and deflationary pressures within China.
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