Listen to the Chinese bond market because it tells you what is coming for the world, especially Australia. As Chinese inflation has surged in recent months, its yields keep on falling:
- Chinese factory inflation is running high and global inflation surging.
- Global money inflows and abundant liquidity are to blame.
- BTFD is in action.
So, if PPI inflation is running wild:
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Then why are bond yields falling?
The answer is that the Chinese bond market knows that the leading indicator for yields is credit and it’s fallen through a trap door:
Global inflation to follow, mostly via crashing commodity prices.