China’s stimulus surge meets Iran strike uncertainty — and the bond market is placing its bet.

Yesterday’s 10-year Treasury climb to 4.39% wasn’t random volatility. It was bond traders making a calculated wager: that China’s surprisingly concrete stimulus package matters more for global growth than five days of postponed Iran strikes matter for oil prices. The $2.4 trillion infrastructure commitment from Beijing came with actual timelines and budget allocations, not the usual vague promises. Meanwhile, oil’s 8% tumble on Trump’s strike delay suggests energy markets are pricing in diplomacy, not escalation.

But here’s what the headline numbers miss: the Treasury selloff is happening with breakeven inflation expectations holding steady at 2.33%. That’s a growth signal, not an inflation warning. When yields rise but inflation expectations stay anchored, it means investors are pricing in more economic activity without believing it will overheat the system. The 10Y-2Y spread widening to 0.51% confirms this read — the curve is steepening because growth expectations are rising, not because inflation fears are spiking.

This matters because China’s stimulus blueprint looks different from their previous playbook. The focus on semiconductor manufacturing and green energy infrastructure creates demand for exactly the capital goods that U.S. exporters produce best. Corporate profit margins expanded 9.2% last quarter partly because productivity gains from AI adoption are keeping unit costs down even as demand picks up. If China’s stimulus drives global capital goods demand while their domestic efficiency gains keep inflation pressures contained, U.S. exporters could see another margin expansion cycle.