China hits back at US, US yield curve re-inverted

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China raises tariffs as retaliation, US prepares to strike back

USDTHB traded widely between 31.58-31.72 yesterday and closed around 31.68.

Following the US tariff hikes on Chinese products, China retaliated by announcing to impose tariffs, with new rates ranging from 5% to 25%, covering more than 5,000 US goods worth USD 60 billion. This will take effect on 1 June, similarly to the actual effective time of Chinese goods newly subject to US duties. Consequently, the US prepared to strike back with new tariffs on USD 300 billion of Chinese goods: mobiles, laptops, toys, etc. In addition, President Trump and President Xi could meet again in late June at the G-20 summit in Japan. Impactfully in financial markets, investors flew from riskier to less risky assets. Stock prices and bond yields tumbled where the US treasury 10-year yield fell below the 3-month yield again.

As the Trump administration is expected to decide on tariff impositions on EU cars by 18 May, the EU prepared a list of US goods worth USD 20 billion for immediate retaliation. However, European Trade Commissioner Malmstroem expected President Trump to extend the 18-May deadline.

Upon the three currency-manipulation criteria by the US: 1) exceeding 3% of current account surplus to GDP, 2) bilateral trade surplus with the US of at least USD 20 billion, and 3) intervention in the currency market beyond 2% of GDP, Vietnam is at risk of being considered manipulating its currency, the dong.

Moving widely between 31.55-31.65 this morning, USDTHB could be between 31.53-31.67 today.


US treasury yields plunge, yield curve re-inverted as China hits back at US

Thai 10-year government bonds (LB28DA) yesterday yielded 2.439%, -0.06 bps.

Thai and US 10-year government bond yields yesterday closed at 2.531%, +0.22 bps, and 2.40%, -7.0 bps, respectively.

Only about 6 weeks after the US treasury yield curve inversion, i.e. the 10-year-3-month spread turning negative in late March due to Fed’s policy U-turn and increasingly rising concerns over the global economic deceleration, the US 10-year yield plunged by as much as 7 bps and the term structure became inverted again on China’s retaliation against the US, 3-month: 2.41% while 10-year: 2.40%.

On downward pressure owing to US-China trade intensification, Thai 10-year government bonds (LB28DA) could be between 2.40-2.45% today.


Sources: bangkokbiznews, BBC, Bloomberg, CNBC, CNN,, Reuters