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Illustration: Lazaro Gamio/Axios

It's certainly a striking headline: "Markets Conclude the U.S. Is Riskier Than China." And the author should know whereof he speaks: Matthew Winkler, the editor-in-chief emeritus of Bloomberg News, literally wrote the book on how to report on markets.

But Winkler is wrong. (And/or he has created "an unintentional Sokal Hoax for finance.") Contra Winkler's assertion, the U.S. Treasury does not have to "pay a premium over Chinese bonds to attract investors." To see that, just compare the two countries' bond yields. China sometimes borrows in dollars, so we can compare apples to apples. And the evidence is clear: At every maturity, China pays more than the U.S. does.

  • A bond maturing in 2022 yields 3.1%, or 33bp over Treasuries.
  • A bond maturing in 2023 yields 3.3%, or 50bp over Treasuries.
  • A bond maturing in 2027 yields 3.5%, or 62bp over Treasuries.
  • A bond maturing in 2028 yields 3.6%, or 72bp over Treasuries.
  • A bond maturing in 2048 yields 4.1%, or 96bp over Treasuries.

Winkler is comparing domestic-currency interest rates; he concludes that there's a "dichotomy between the U.S and China in the credit markets." But in doing so he ignores the fact that he's comparing two entirely different currencies. He also makes two category errors.

  • These numbers aren't about credit. Countries that issue debt in their own currency, like China and the U.S., can always print money to repay that debt. Local-currency bond yields, by definition, are rates, not credit.
  • There is no correlation between interest rates and riskiness. Italy is a risky country, but the yield on its 1-year notes is only 0.3%. U.K. 1-year bonds, at the height of Brexit chaos, yield 0.8%. Meanwhile, the U.S., which remains the global hegemon and the safest haven in the world, has a 1-year risk-free rate of 2.7%.

Be smart: Local government-bond interest rates are mostly a function of domestic monetary policy and inflation expectations; they tell you next to nothing about a country's creditworthiness. Neither do they indicate anything about endogenous economic risk.

Go deeper: The market rally that could signal a coming recession

Go deeper

Scoop: U.S. begins denying Afghan immigrants

Afghan refugees on a bus bound for temporary housing after arriving in Greece. Photo: Byron Smith/Getty Images

The Biden administration has begun issuing denials to Afghans seeking to emigrate to the United States through the humanitarian parole process, after a system that typically processes 2,000 applications annually has been flooded with more than 30,000.

Why it matters: Afghans face steeper odds and longer processes for escaping to the U.S., despite the earlier sweeping efforts by the Biden administration to assist its allies. Immigration lawyers and advocacy groups say the government has set untenable barriers to a safe haven in the U.S.

39 mins ago - Politics & Policy

Dems invoke Robert Byrd to sell Manchin on Senate rules changes

Photo illustration: Shoshana Gordon/Axios. Photos: Diana Walker, Chip Somodevilla/Getty Images

A small group of Senate Democrats is privately invoking the legacy of late West Virginia Sen. Robert Byrd in an effort to sway Sen. Joe Manchin (D-W.Va.) to support their plans to change the chamber's rules, Axios has learned.

Why it matters: Manchin — who holds Byrd's Senate seat — has often referenced his predecessor's strong moral conviction and insistence on preserving the Senate as an institution, as justification for some of his tough positions.

House votes to ban imports from Xinjiang over forced labor concerns

House Speaker Nancy Pelosi. Photo: Anna Moneymaker/Getty Images

The House voted 428-1 on Wednesday to pass a bill that would ban all imports from the Chinese region of Xinjiang unless the U.S. government determines that the products were not made with forced labor.

Why it matters: Both the Trump and Biden administrations, as well as several foreign parliaments, have recognized China's repression of Uyghurs and other Muslim minorities in Xinjiang as genocide.

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