Securities Times reporter He Jueyuan
After entering October, the yield of 10-year Treasury bonds showed a rapid upward trend. Wind data shows that the 10-year Treasury bond yield broke through 2.9% on the first trading day after the National Day, and broke through the 3% mark at the close of October 18, which also means that the current point basically returns to before the central bank’s full RRR cut in July. level. As of the close on October 22, the 10-year Treasury bond yield fell back to 2.98%.
Experts believe that there is still room for a rebound in the bond market in the fourth quarter, and interest rates may show a downward trend. It should be noted that interest rates in the bond market will follow economic capital rather than short-term inflation. In the fourth quarter, monetary policy will show a marginal easing trend, and economic operations are expected to show a bottoming and stabilizing trend.
The bond market fell back to the level before the July RRR cut
Looking back at the trend of the 10-year Treasury bond yield in the third quarter, before the central bank officially announced a comprehensive RRR cut on July 9, the 10-year Treasury bond yield also stood at the 3% mark. Subsequently, the government bond yield continued to fall, and the yield in August and September basically fluctuated in the range of 2.8%-2.9%. However, after entering the fourth quarter, the 10-year Treasury bond yield has shown a rapid upward trend, and recently broke the 3% mark, which means that the current point is basically returning to the level before the central bank’s overall RRR cut in July.
Regarding the recent fluctuations in the bond market, the deputy director of the CITIC Securities Research Institute and the chief FICC analyst clearly believes that the trading logic of the bond market has switched after the National Day holiday. As a result of the game back and forth between Kuan Credit and Kuan Credit, after the National Day holiday, the expectation of Kuan Credit in the bond market has increased, and the expectation of Kuan Currency has declined.
Since the central bank’s RRR cut in July and economic data began to weaken, the market is generally expected to usher in loose monetary policy again. However, monetary policy was not loose again in the third quarter. After entering the fourth quarter, Sun Guofeng, Director of the Monetary Policy Department of the People’s Bank of China, said at a recent press conference on the central bank’s financial statistics for the third quarter of 2021 that the supply and demand of liquidity in the banking system will continue in the fourth quarter. Maintain a basic balance without major fluctuations. After the central bank’s statement, the market’s expectations for wide currencies quickly cooled down.
At the same time, on September 29, the People’s Bank of China and the China Banking and Insurance Regulatory Commission held a real estate finance work symposium, and proposed “protecting the legitimate rights and interests of housing consumers.” The China Banking and Insurance Regulatory Commission issued a document on October 5 that emphasized “guaranteeing the reasonable financing needs of coal-fired power, coal, steel, non-ferrous metals and other production enterprises.” Relevant meetings and documents have raised the market’s expectations for wide credit.
In addition to the market’s change in expectations from a wide currency to a wide credit, China Merchants Bank Research Institute also pointed out that the reasons for the adjustment of the bond market also include increased market concerns about inflation. It is generally believed that prices will further restrict the central bank’s monetary policy easing. In addition, bond supply pressure still exists in the fourth quarter. Due to the slow pace of local government bond issuance in the first half of the year, a large number of outstanding quotas have been accumulated to the fourth quarter. It is expected that the total amount of local government bond issuance in the fourth quarter will exceed 1.3 trillion yuan, significantly higher than the level of previous years. On the one hand, the bond market has increased supply pressure. On the other hand, it will support the social financial data, and both of them will trigger the market’s cautious sentiment.
There is room for a rebound in the bond market in the fourth quarter
As of the close on October 22, the yield on the 10-year Treasury note fell back to 2.98%. Many experts pointed out that after the release of the main economic data in the third quarter, the current high producer price index (PPI) data and the decline of the main economic data in the third quarter made the current economic operation present a “stagflation” environment. The market is divided on the subsequent bond market trends, but there is still room for recovery in the bond market in the fourth quarter.
“The current market-like’stagflation’ environment makes the market more confused about the subsequent monetary policy and interest rate trends.” Wu Ge, chief economist and assistant to the president of Yangtze River Securities, held the fourth quarter of 2021 bonds in the “Bond” journal of China Securities Clearing Company The City Research and Judgment said in the six-person talk event that in the future, bond market interest rates will eventually follow economic fundamentals rather than inflation. Before the second quarter of next year, interest rates may show a downward trend of volatility. In the fourth quarter, social financing may be in the process of building a bottom and stabilizing. Around November, it is expected that the year-on-year growth rate of social financing stock will stabilize, laying the foundation for the stabilization of nominal GDP in the next six months.
Fu Liyan, head of Huaxia Jiuying Assets Fixed Income Investment Center, also pointed out that this round of inflation is caused by the supply side and should not be a factor that constrains monetary policy. Therefore, there is still a chance to see monetary policy relax in the fourth quarter. In addition, although short-term inflation hits the bond market, it also provides opportunities for interest rates to rise.
According to Hu Zhihao, a researcher at the Institute of Finance of the Chinese Academy of Social Sciences and deputy director of the National Finance and Development Laboratory, when looking at inflation, it is important to note that many factors other than the current monetary policy have a greater impact on the supply side. Large price fluctuations will change people’s expectations. It is expected that the probability of subsequent inflation downturn is greater, and in the future, the greater the price fluctuation, the greater the downside possibility.
Liu Yu, chief analyst of GF Securities’ fixed income, believes that inflation will not trigger a tightening of monetary policy, but higher inflation expected in the bond market restricts monetary policy easing. The marginal slowdown in economic data may have a greater impact on the bond market than inflation. The economic fundamentals in the fourth quarter may be an important supporting factor for the bond market, and attention should be paid to the adjustment of the economic situation by the relevant departments. In addition, we also need to focus on whether the structural lenient credit policy is strong enough to support a trend rebound in credit.
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