During the "double Festival" holiday, the US bond yield soared to a new high of nearly 16 years, and overseas markets were volatile, and major asset prices generally fell.
Industry insiders said that US Treasury bonds are one of the important allocation assets for all kinds of investors around the world, and the fluctuation of its interest rate will not only affect the bond market of various countries, but also play a pivotal role in the pricing of various types of assets such as stocks, commodities and foreign exchange. In the short term, the 10-year Treasury yield still has the potential to move higher. However, higher long-term yields may lead to the risk of a "hard landing" of the US economy, and US stocks may have a lot of room to fall. For the A-share market, it is recommended to pay more attention to marginal changes in A-shares rather than US Treasuries.
Treasury yields rose
On October 9, the yield on the 10-year Treasury remained high. At the close of local time on October 6, the 2-year US bond yield closed at 5.08%, the 5-year US bond yield closed at 4.75%, and the 30-year US bond yield rose 2 basis points to 4.96%.
The US Labor Department recently released data showing that the US non-farm sector added 336,000 jobs in September, far exceeding expectations of 170,000, and also exceeding the average of 267,000 in the previous 12 months. Affected by this, on October 6, the 10-year US bond yield once rose to 4.89%, a new high in nearly 16 years.
Zheshang Securities research report said that at the end of July as a starting point, the 10-year US bond yield rose from 3.9% to 4.8%, a cumulative increase of nearly 90 basis points.
Us Bond Yields Soar Li Chao, chief economist of Zheshang Securities, analyzed that the rise in US bond yields this round is mainly driven by real interest rates, rather than inflation expectations. Short-term US fiscal stage "success", "wide fiscal and tight monetary" policy to support the continuation of economic resilience, the US economy may continue to be strong and resilient in the high interest rate environment, long-term economic growth expectations to drive up the neutral interest rate, promote the 10-year US Treasury yield upward.
Industry insiders said that changes in the supply and demand of US Treasuries caused by the increasing borrowing needs of the US government are also the main reason for pushing up US Treasury yields. China International Capital Corporation research report said that if the Federal Reserve to fight inflation and maintain high interest rates, the next ten years the US government interest expenses or significantly rise, which means that the US fiscal financing demand will increase, the supply of US Treasury bonds will increase. At the same time, with the deepening of the Federal Reserve's "balance sheet reduction", the European Central Bank's interest rate hike, the Bank of Japan is expected to withdraw from negative interest rates, and the marginal decline in demand for US bonds by domestic and overseas buyers, the two forces are superimposed, leading to the expansion of the term premium of US bonds and the rise in yields.
It affects the pricing of major asset classes
Looking ahead to the trend of the 10-year US Treasury yield, Li Chao said that in the short term, the 10-year US Treasury yield still has the possibility of further rising, which may break through 5% and gradually smooth out the inversion range with the 2-year US Treasury yield. In the medium term, the potential factors that will push US bond yields to turn around will mainly come from two aspects: first, the strength of fiscal spending, if the fiscal year 2024 budget is significantly blocked, it will undermine the resilience of the US economy; The second is the financial stability risk, the rapid rise in US Treasury bond yields may make the risk of US banks reappear in March, and financial risks force monetary policy to turn may drive US bond yields down.
East China Sea Securities research report analysis, the slow cooling of the US employment rate is still continuing, the US CPI in October if higher, the Federal Reserve still has the possibility of restarting interest rate hikes, the resilience of US employment may promote long-term bond yields in the future to maintain a high level for a long time.
Talking about the impact of the US bond yield on major assets, Chen Jianheng, chief analyst of China International Capital Corporation Fixed Income, said that the volatility of the US Treasury bond interest rate will not only affect the bond market of various countries, but also have a decisive role in the pricing of various major assets such as stocks, commodities and foreign exchange.
The rise in US bond interest rates has an obvious impact on the gold market. Data show that as of press time, the dollar index is still at 106 high, on October 3, the index once rose to 107.35; COMEX gold was at $1,866.3 an ounce after falling as low as $1,823.5 during the long holiday. "The rise in US Treasury yields and the strong rise in the US dollar index have led to funds shorting gold, the CFTC speculative net long position has turned into a rare net short position, and ETF holdings have continued to outflow, causing gold prices to fall." Shanghai Topix futures research report said.
In addition, some strategists say they are still bearish on risk assets. The reason is that higher long-term yields may lead to an increase in the risk of a "hard landing" of the US economy, and US stocks may have a lot of room to fall.
On the impact of the A-share market, Tianfeng Securities suggests paying more attention to marginal changes in A-shares rather than US Treasuries. The correlation between inflation-protected US Treasury bonds (TIPS, that is, the real interest rate indicator of US bonds) and A-shares is mainly reflected in every time TIPS go up quickly in the short term. However, in the medium term, the trend of A-shares depends on the fundamentals and is not directly related to TIPS. Therefore, the surge in US bond interest rates is more of A short-term impact on the current position of A shares.