What would you expect to care more about Chinese economic data: the US bond market or the Chinese stock market? Option 2? Good, I agree.
Now, if you said that US bond yields and Chinese stocks were moving higher together in response to strong Chinese economic data, I could also agree with that, but I hope we could both agree that any subsequent reversal in Chinese stocks would be worth at least something to US bonds.
That’s what happened overnight. In fact, by 4am, Chinese equities had given back almost all of their gains from Friday. But Treasuries didn’t even seem to notice. Granted, we could certainly say that Friday’s moves were driven by economic data and today’s were due to “something else,” except of course when the first sentence of today’s Reuters Asia markets recap reads like this:
“Hong Kong stocks ended lower on Monday, as signs of slowing China and global economic growth offset optimism related to trade talks and a jump in bank lending in China.”
Incidentally, that “bank lending” thing was what Friday was all about, ostensibly. Long story short, markets are asking you to believe the “opposite of something that hurts you” doesn’t help you. I don’t like that logic, but markets are fickle and often not so cut and dried. All of the above makes Tuesday night’s Chinese economic data somewhat interesting (assuming it has an impact on China, of course).
Meanwhile, back in the US, bonds look like they might have encountered some support at 2.57%+ but also look to be respecting resistance at 2.55%. I don’t think we can rule out a willingness for rates to move even higher until we see some decisive move in the other direction.