Could Xi Zap Bonds?

If a second hike in US policy rates this July now looks a certainty following a strong FOMC hint, the behaviour of the long-end of the bond markets seems more like a conundrum. In a textbook World, rising short-term rates should bearishly flatten the yield curve. Many investors seem so positioned. Up to now we have been big fans of bonds, but it is time to change. We do not disagree that yields should rise, but we suspect that rising yields may come alongside a steepening yield curve. In other words, the long-end of the market could sell-off. And China may hold the key.