What question did this study set out to answer?

This study aims to demonstrate that the China-U.S. yield spread serves as a fundamental regime variable affecting global asset pricing dynamics.

July 3, 2026Open Access

The Unified Field of Spreads: The China-U.S. Yield Spread as a Regime Variable in Global Asset Pricing

Key Points

This study aims to demonstrate that the China-U.S. yield spread serves as a fundamental regime variable affecting global asset pricing dynamics.
Analysis of the predictive power of the China-U.S. yield spread on various assets including gold and crude oil.
Utilization of statistical methods, including R² and F-tests, to evaluate pricing relationships and structural changes.
Exploration of institutional interfaces related to the yield spread's impact on asset pricing.
Gold pricing correlation with the yield spread exhibits R² = 0.551, signaling strong predictive power for bull markets.
Crude oil pricing shows significantly lower predictive ability at R² = 0.001, indicating a regime change in reaction to the Shanghai futures.
The correlation of Chinese interest rates with gold (-0.67) surpasses that of U.S. interest rates (-0.07), indicating a shift in pricing stability.

Abstract

After being identified as a cross-market pricing factor (Tang, 2026), the deeper pricing attributes of the China-U.S. yield spread have yet to be fully revealed. This paper proposes and verifies that the China-U.S. yield spread is not an ordinary pricing factor but a "regime variable" for global assets—its sign and extreme values determine the pricing regime under which gold, crude oil, Chinese government bonds, and U.S. Treasuries operate. The core findings of this paper include: (1) The spread's pricing of gold is "regime-based"—deep inversion (<-2.5%) is the most reliable macro signal for a gold bull market, with a historical average 12-month subsequent return of 61.4% and no negative returns ever recorded; the spread's predictive power for gold's annual return reaches R² = 0.551. (2) The spread's pricing of crude oil is "conditional"—the annual-frequency R² is merely 0.001, a 550-fold difference from gold. Around the launch of Shanghai crude oil futures (SC), the spread coefficient underwent a systematic sign reversal (from -11.57 to +11.51 at the annual frequency), and the transmission channel switched from the "demand side" to the "exchange rate side"; institutional IV tests confirm the causality of this activation effect (first-stage F = 2,425.75). (3) Institutional interfaces possess a hierarchical structure—SC belongs to the "activation type" (Chow test F = 736.53), creating a new pricing transmission channel; the Shanghai Gold Benchmark Price (SGE) belongs to the "enhancement type" (Chow test F = 0.20, p = 0.82), stabilizing an already existing pricing factor (nested F = 750.27). (4) The correlation between Chinese interest rates and gold prices (-0.67) far exceeds that of U.S. interest rates (-0.07); the "anchor" for gold pricing has shifted from U.S. rates to Chinese rates. Based on the above findings, this paper proposes the "Unified Field of Spreads" hypothesis: the pricing of the world's four core assets is determined at the macro level by a single regime variable (the China-U.S. yield spread); when the spread is positive, the U.S. anchor dominates global pricing, and when it is negative, the Chinese anchor acquires independent marginal pricing power. This paper supplements or modifies several classical theories, including Interest Rate Parity (the spread's R² for exchange rate changes = 0.001, versus R² = 0.315 for valuation gap changes), the Mundell-Fleming model (capital controls have not severed spread transmission), and the Triffin Dilemma (the spread is a thermometer of reserve currency competition). Together with Tang (2026)'s dual-anchor commodity pricing paper and Tang (2026b)'s government bond valuation percentile paper, this paper forms the complete theoretical framework of the "Dual-Anchor Regime" of global asset pricing.

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