Chinese bond collapse shakes foundations of global economy, threatens crypto market

The yield on one-year Chinese government bonds fell below 1% for the first time since the Great Financial Crisis, adding to the year-to-date decline.

The benchmark 10-year yield fell to 1.7%.

How does this play out for risk assets like bitcoin, which plummeted overnight? Well, there are two key reasons to feel optimistic. For starters, the continued fall in yields suggests that Beijing will have to implement more aggressive stimulus measures than we saw earlier this year.

Jeroen Blokland, founder and manager of the Blokland Smart Multi-Asset Fund, put it succinctly: “This indicates that China’s economic problems are far from over, and the government will do what aging economies typically do: increase government spending, allow larger deficits and higher debt levels, and cut interest rates all the way to zero.”

And there’s more to consider. This situation in China also raises questions about Federal Reserve Chairman Jerome Powell’s recent alarm over interest rates, which sent bitcoin down from $105,000 to $95,000.

China, the world’s factory, faces increasingly severe deflation after already experiencing the longest period of falling prices since the late 1990s. That could limit CPI and PPI readings around the world, including in the United States, a major trading partner.

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