U.S. bond yields soared and bond prices plummeted, driving the adjustment of the overseas foreign debt market, but China's bond market rose sharply.
On January 19, the US 10-year Treasury yield rose 1.9% intraday for the first time since January 2020. In terms of Chinese treasury bonds, treasury futures continued to rise across the board, with the lowest intraday trades of 10-year active bonds trading near 2.7%. The 10-year Treasury spread fell to within 90 basis points, hitting a new 32-month low.
The US debt fell sharply, how can China's bond market get out of the independent market? The RRR cuts have landed successively, where will China's bond market go in the future? Will the "seesaw of equity and debt" appear again?
Policy differences determine the divergence of interest rate trends
The Fed is likely to accelerate the pace of monetary policy tightening, pushing real interest rates higher, with the recent 10-year US Treasury yields rising.
On January 19, the 10-year Treasury yield stood at 1.9%, the highest since January 2020.
Source: Ying Wei Cai
Us treasury interest rates have soared continuously, driving a comprehensive adjustment in the overseas bond market. On the 19th, the UK 10-year bond yield rose more than 7 basis points to 1.292%, the highest level since March 2019.
At the same time, China's bond market yields have been all the way down, and the 10-year Treasury spread between China and the United States has narrowed to less than 90 basis points, hitting a new 32-month low.
10-year Treasury Bond Active Bond (210017) 19-day trend
Source: Wind
In the eyes of industry insiders, the difference in the direction of monetary policy determines the completely different direction of interest rates in the markets of the two countries.
On January 17, the interest rates of the two major policy instruments of the open market reverse repurchase and the MLF fell at the same time, and the long-awaited policy interest rate cut in the market landed.
Chen Jianheng, chief analyst of ciccumb fixed income, said that the interest rate cut has fulfilled some market expectations, but it means more that a new round of interest rate decline has started. Huang Wentao, chief economist of CITIC Construction Investment Securities, gave a reason to continue to do more - there is still a possibility of RRR cuts and interest rate cuts in the future.
On January 18, the relevant person in charge of the People's Bank of China said that the space for reducing the RRR has become smaller, but there is still a certain space, which can be used according to the needs of economic and financial operation and macroeconomic regulation and control.
Previously, the People's Bank of China's monetary policy report in the third quarter of 2021 pointed out that the prudent monetary policy is stable, with me as the mainstay, enhancing autonomy, grasping the policy strength and rhythm, and actively and steadily responding to the adjustment of monetary policy in developed economies.
January is still the time window for longs
With the favorable policies such as RRR cuts and interest rate cuts being cashed in one after another, the focus of the bond market has gradually shifted from "stable growth - monetary looseness" to "monetary looseness - stable growth".
Feng Lin, an analyst at Oriental Jincheng Fixed Income, said that on the one hand, the interest rate cut beyond expectations points to the current downward pressure on the economy and the strong demand for stable growth; on the other hand, after monetary easing is in the front, the market's expectations for credit expansion and stable growth will also be enhanced.
The chief analyst of citic securities fixed income clearly suggested that as more policy initiatives are coordinated, the bond market may turn to the effect of wide credit, such as the color of credit "opening red".
Historical experience shows that large-scale monetary easing usually has the effect of "short and long short" for the bond market, which is the embodiment of the changes in market expectations mentioned above.
Until the effect of wide credit is verified, there may still be room for downward shocks in bond market interest rates.
Huang Wentao believes that monetary easing superimposed on weak credit recovery, market interest rates may still have lows in the first quarter, and the follow-up will rebound under the expectation of economic stabilization. Huang Weiping, chief analyst of fixed income at Industrial Securities, said that January is still the window of time for long bonds.
A number of institutions are optimistic about stock market opportunities
It is worth noting that although the bond market has remained strong, the market's optimistic view of the trend of stocks is increasing.
Zhong Zhengsheng, chief economist of Ping An Securities, said that "wide money" has boosted the decline in funding interest rates, creating a favorable liquidity environment for the stock market, and "wide credit" will also significantly enhance market risk appetite.
Chen Xi, chief analyst of fixed income at Kaiyuan Securities, said that after experiencing a sharp correction at the beginning of the year, the stock market risk has been significantly released, and the improvement of economic fundamentals will provide upward momentum for the stock market, and it is fully optimistic about the stock market.
Li Chao, chief economist of Zheshang Securities, believes that interest rate cuts can moderately alleviate the downward pressure on industries related to the non-stable growth chain, and the follow-up is optimistic about structural opportunities in the stock market: First, the financial sector, especially the banking sector, mainly benefits from the increase in the scale of banking business driven by the amount of credit in the first quarter; second, real estate and its post-cycle related sectors may benefit from real estate investment in the context of "rent-purchase and holding" exceeding expectations; third, the infrastructure-related building materials field may benefit from the first quarter of infrastructure projects. It will also benefit from property investment exceeding expectations.
EDIT: Leaf Pine