Goldman Sachs Withdraws PBOC Rate-Cut Forecast as Chinese 10-Year Bond Yield Nears 2%
Chinese 10-year bond yields have climbed from record lows around 1.8% and may exceed 2% this year as deflationary pressures ease and inflation expectations rise. Goldman Sachs has withdrawn its forecast for a PBOC rate cut and revised up its China inflation outlook following the bond market shift.
1. Inflection in Chinese Bond Yields
Chinese 10-year yields have risen from record lows near 1.8% and face potential to break above 2% this year as deflationary pressures subside. The spread between five-year and 30-year notes has widened to a four-year high, while the 30-year yield briefly reached its highest level since September 2024, supported by moderating factory deflation and stronger retail sales.
2. Goldman Sachs Adjusts China Monetary Outlook
Goldman Sachs has withdrawn its projection for a People’s Bank of China rate cut in response to the bond-market repricing and has raised its inflation forecast for China. This adjustment follows shifts in market expectations signaled by interest-rate swap rates and reflects growing concerns over oil-driven price pressures.
3. Emerging-Market Bond Repricing Accelerates
The average yield on emerging-market local-currency bonds climbed to its highest level in almost two years in March. Energy-importing countries such as Poland, South Africa and Thailand experienced yield jumps of 50 to 100 basis points, highlighting the broader repercussions of China’s rising yields.