- China's sovereign bonds rose and the yuan sank after the People's Bank of China slashed key policy interest rates in an effort to support the country's struggling economy.
- On Tuesday, the PBoC stunned markets by cutting the rate on its one-year loans - or medium-term lending facility - by 15 bps to 2.5%.
- Chinese stocks reacted differently to the decision, with mainland Chinese markets oscillating and Hong Kong equities dropping. Shares climbed in Australia and Japan, where earlier official data revealed that the economy increased faster than projected, indicating resilience. US equities futures rose slightly.
- Treasury yields were stable in early Asian trading. On Monday, the policy-sensitive two-year rose for the fourth day to near 5%, while the 10-yr rose to its highest level since November. Traders betting that US interest rates will remain higher than inflation for a long time drove 10-yr real yields to a 14-yr high. This boosted the dollar's performance against some of its main peers and emerging market currencies.
- Additional data on Tuesday, including as retail sales and industrial production, will give more light on the Chinese economy's status.
