China's Inflation Figures Set for Release Amid Global Bond Market Turmoil

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In a pivotal moment for global economic markets, China is set to release its latest inflation figures on Thursday, coinciding with a rising trend in long-term bond yields worldwide. As investors forecast that persistent inflation may lead central banks, especially the U.S. Federal Reserve, to either taper or halt rate cuts, yields on U.S. and UK bonds have surged to their highest levels in decades.

The U.S. Treasury yield for 30 years is nearing 5%, while the UK’s 30-year gilt yield has reached a peak not seen since 1998. Fed Governor Christopher Waller has expressed a confident stance on inflation eventually falling to the Fed’s 2% target, despite concerns echoed in recent Fed policy meeting minutes.

Contrastingly, China is battling deflation with persistent negative producer and consumer inflation rates. Analysts predict that the country’s Producer Price Index (PPI) for December will show a slight improvement from -2.5% to -2.4%, while the Consumer Price Index (CPI) is expected to cool to just 0.1% from 0.2%.

As Chinese bond yields decline to record low levels—now beneath those of their Japanese counterparts—the yuan has plummeted to a 16-month low. This context highlights significant economic challenges facing China, setting a stark contrast with the inflationary pressures exerted in Western economies.

Key economic developments to watch include China's PPI and CPI data, alongside retail sales figures from Australia and trade statistics from Taiwan and the Philippines.

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