1. Review of the trend of U.S. bond interest rates last week
In the week of April 11, 2022, the 10-year U.S. bond yield rebounded to a high after a shock. On Monday, Federal Reserve officials’ speeches strengthened the possibility of interest rate hike 50 basis points in May, which once again heated up the market’s expectations for accelerated policy tightening and pushed the 10-year U.S. Treasury yield upward; on Tuesday and Wednesday, the main reason was that the March U.S. core CPI continues to slow down month-on-month, Russia-Ukraine negotiations are not progressing smoothly, and the 10-year U.S. bond yield has fallen for two consecutive trading days; on Thursday, affected by New York Fed Chairman Williams’ hawkish speech and the March U.S. import price index Driven by exceeding expectations, the 10-year U.S. Treasury yield rose above 2.8%, a cumulative increase of 11bp from the previous Friday (April 8).
2. Short-term trend outlook
This week is about to enter the last week before the silence period of the Federal Reserve’s May interest rate meeting. Many Federal Reserve officials will still make speeches. However, given that Federal Reserve officials have released intensive hawkish signals before, the market is pricing in interest rate hikes. It is quite sufficient - the latest CME federal funds rate implied interest rate hike expectations shows that the market expects a 90.4% probability of raising interest rates by 50bp in May - and the market has also priced in the Fed’s policy decisions at every meeting for the remainder of this year. The possibility of interest rate hikes. Therefore, we judge that no matter how the Fed officials create momentum in their speeches this week, their incremental impact on U.S. bond interest rates will be limited. It is expected that before the interest rate meeting at the end of April and early May, the 10-year U.S. bond interest rate will be at the current level. fluctuates within a narrow range near the higher point and .
3. The U.S. Treasury yield curve continues to steepen
Long-term interest rates rose significantly last week, causing the 10Y-2Y U.S. Treasury yield curve to continue to steepen. As of April 14, compared with the previous Friday (April 8), except for the 2-year and 3-year U.S. bond yields that fell, the other U.S. bond yields of all maturities rose to varying degrees. Among them, the yields on long-term U.S. bonds with maturities of 10 years and above increased significantly. The yields on 10-year, 20-year, and 30-year U.S. bonds rose by 11bp, 15bp, and 16bp respectively; U.S. bond yields rose by 3bp, 3bp and 5bp respectively; 2-year and 3-year U.S. bond yields each fell by 6bp. As a result, the interest rate spread of U.S. Treasury bonds 10Y-2Y last week widened to 36bp, and the yield curve continued to steepen.
4. The inversion of interest rates between China and the United States has deepened
As of April 14, as the 10-year China Bond interest rate has only slightly increased by 1bp compared with April 8 (the previous Friday), while the 10-year U.S. bond interest rate has increased sharply by 11bp over the same period. The inversion in the 10-year treasury bond interest rate gap between China and the United States deepened to 6bp. In the short term, considering that the central bank's reserve requirement ratio cut on April 15 was less than expected and the interest rate cut expectations fell through, reflecting that the implementation of monetary policy is still relatively cautious, it is expected that the domestic bond market will face correction pressure due to less than expected monetary easing, while U.S. debt The room for upward interest rates is limited, so the degree of inversion in the interest rate gap between China and the United States is expected to be reduced.
This article comes from Oriental Jincheng
