China Is the Source of the Deflation Trade

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Forget about a recession in the US. Currently, it is China’s recession/depression that is weighing on prices, global bond yields, and the . Weak Chinese demand for oil caused OPEC today to trim the outlook for global oil demand, further depressing oil prices. prices fell below $70 a barrel on Tuesday to their cheapest since December 2021 (chart).Brent Crude Oil Chart

Declining oil prices dragged the down to 3.65%, lows not seen since early 2023 when markets fretted that the mini-regional banking crisis would spark a recession (chart).Brent Crude vs US 10-Yr Yield Chart

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