A Warning Message From Bonds?

Wall Street May Be The Most Important Stock Market, But China Is The Most Important Bond Market

“An' the dawn comes up like thunder outer China 'crost the Bay!” (Kipling, Mandalay)

We remain ‘Risk On’, but good news is getting less easy to find. What’s more, despite recent fears about inflation and the future solvency of the spend-thrift Federal government, US Treasuries are rallying. Admittedly it is possible that this new lease of life may be a bonus linked to foreign capital welcoming the Trump 2.0 economy, but that seems unlikely. We argue here that investors’ risk positioning is becoming more cautious. The reasons may be connected to the potential knock-on effects of a faltering Chinese economy and the message from Chinese bonds.