The unprecedented rise in yields on 10-year U.S. Treasury bonds to a 3-year high has narrowed the gap with Chinese sovereign bonds, something that hasn’t happened in more than 10 years, which analysts believe reflects the divergence in monetary policy between the two countries, CNBC wrote.

Investors have begun to watch the phenomenon closely as yields on U.S. securities are higher than China’s, theoretically canceling the investment strategy of buying Chinese bonds, which yield more than U.S. Treasuries.

It remains to be seen whether this trend will be sustainable and long enough to carry large-scale consequences.

According to Refinitiv Eikon data, the yield on 10-year U.S. Treasuries traded around 2.857% on Wednesday, slightly below China’s 10-year government bond yield of 2.873%. Yields on U.S. securities rose above their Chinese counterpart early last week for the first time since 2010 and have struggled to maintain a small premium over the past few days.

However, the monetary policies pursued in the two countries are quite different: while the People’s Bank of China is loosening monetary policy and cutting rates, the U.S. Federal Reserve is tightening policy and raising rates.

China and the US are also facing different inflation dynamics: producer prices in both countries are rising, while consumer prices in China are rising less than in the US. An issue worrying investors is the possibility of capital outflows from the country if the yuan weakens too much.

While the yuan has been trading near 3-year highs against the dollar in the past few months and has weakened slightly in recent weeks: around 6.37 on Tuesday, down 0.38% year-on-year, China’s large trade surplus is strongly offsetting the impact of the narrowing yield gap on the yuan.

According to specialist – Gao Xiang, a bond analyst at Nanhua Futures in Hangzhou, “There is no sign yet that China or the United States will change their monetary policy focus. Interest rates of both countries will continue to show relative independence. In this process, the RMB exchange rate will play an important role as a buffer and will also be an important indicator for the future.”

According to Larry Hu, Macquarie’s chief China economist, the yuan will face more depreciation pressure due to the country’s declining trade surplus, and the convergence of US and Chinese 10-year bond yields is not important as the gap has been narrowing for more than a year. China has a trade surplus as exports exceed imports.In March, the trade surplus was $47.38 billion.