FX.co ★ China 10-Year Yield Falls Amid Renewed Trade Tensions

On Monday, the yield on China's 10-year government bond decreased to approximately 1.7% as investors gravitated towards safer assets due to renewed trade tensions. This followed President Trump's announcement on Friday that the United States would increase tariffs on steel imports to 50%, effective June 4, as a strategy to decrease dependency on Chinese products. Tensions further escalated when China accused the United States of "seriously violating" the truce agreed upon in May, promising to implement "strong and resolute measures" in response. The conflict was reignited after Trump's allegations that China had breached the Geneva agreement reached the previous month. Despite these tensions, Trump's adviser Kevin Hassett indicated a potential conversation between President Trump and President Xi could occur "as soon as this week," although a specific timeline has not been established. Simultaneously, the latest Purchasing Managers' Index (PMI) data from China indicated some stabilization signs, although the country's recovery remains vulnerable due to weak domestic demand and persistent trade tensions. Official data showed a rise in the manufacturing index to 49.5 from 49.0, a slight increase in the composite index to 50.4, and a decline in the services sector to a four-month low of 50.3.