(Bloomberg) -- A global selloff in longer-dated bonds has finally spilled over into Chinese debt, as easing US trade tensions and Beijing’s efforts to tackle deflation damp demand for the notes.

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Futures on China’s 30-year government securities fell as much as 0.7% on Wednesday to head for the longest run of losses since the contracts were launched in April 2023. Yields on similar-maturity debt in the cash market were on track to rise for a sixth straight session after climbing one basis point to 1.92%.

Long-end bonds have borne the brunt of investors’ ire worldwide as election largesse and tax cuts trigger fears of bigger fiscal deficits in major markets such as Japan and the US. In the case of China, the rise in yields may suggest that pessimism toward the domestic growth outlook is easing, although a continued increase would likely drive up the cost of government financing.

Another extension of the US-China trade “truce would likely be positive for risk assets, and may encourage a further rotation from bonds to equities,” said Lynn Song, chief Greater China economist at ING Bank NV. “It would not be surprising to see 30-year yields move higher toward 2% in the event we get risk-positive developments in August.”

China’s longer-dated notes had earlier shrugged off the selloff in their global peers as investors wagered that authorities would ease policy further and keep liquidity loose to fight persistent deflation. But the focus has now shifted to Beijing’s anti-involution drive to curb oversupply in industrial products and boost prices.

Becky Liu, head of China macro strategy at Standard Chartered Bank, said the campaign reduces the risk of a prolonged period of deflation and interest-rate cuts. However, the supply-side reforms may be less effective than earlier efforts seen in 2015 to 2016, and this should limit the upside in yields, she added.

On the trade front, US Treasury Secretary Scott Bessent said he will meet his Chinese counterparts in Stockholm next week for a third round of talks aimed at extending a tariff truce and widening the discussions. The decline in bonds also came on the heels of the launch of a 1.2 trillion yuan ($167 billion) mega-dam project in Tibet, which is expected to provide more support to the economy.

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--With assistance from Julia Zhong.

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