Secondly, national debt, as a bond issued by the state, is considered risk-free, and the interest rate of national debt corresponds to the risk-free interest rate, which is the pricing benchmark of the whole interest rate system. The rise in the yield of government bonds corresponds to the overall increase in interest rates. Then, for the economy, it means an overall increase in financing costs.
Generally speaking, long-term interest rates are determined by economic fundamentals (or return on investment). Usually, the rise in the yield of national debt corresponds to the improvement of economic fundamentals. Since 20 17, it is a fact that the economic data is improving, which is the driving force for the increase in the yield of government bonds.
Of course, treasury bonds futures are also financial derivatives, and their prices are affected by factors such as capital supply and demand, market sentiment and so on besides fundamental factors. Specific to the recent decline, because the fundamental expectations have been basically digested, it is mainly affected by the uncertainty of the later regulatory policies, the possible further tightening of overseas monetary policies and the fragile market sentiment.
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The basic impact of the appreciation of the yield of 10-year treasury bonds is that the social financing interest rate will rise, and vice versa. If things can't be sold, they will be promoted at a reduced price. Similarly, when fewer and fewer people buy bonds, issuers can only sell bonds at a discount. For example, the face value of 100 is now sold in 98 yuan, which is equivalent to the yield. An increase of 2% means an increase in yield bonds. Among all kinds of bonds, the US 10-year national debt has the highest credit rating and is considered as a risk-free interest rate (the government has the right to pay off debts by increasing taxes and printing money).
In terms of yield, when someone needs to raise national debt to buy it, other bonds (financial bonds and corporate bonds) must raise interest rates to sell it. In this way, the interest rates of all loans in the society will rise accordingly (the psychological activity of the lender: I will only pay 3% interest when I lend you money, so I might as well buy 3.7% national debt). Therefore, the yield of 10-year treasury bonds is the benchmark of social financing interest rate. The increase in the yield of 10-year government bonds means that funds will tighten monetary policy, while the decrease means that when the yield of government bonds appreciates, there will be fewer investors in government bonds.
There are two situations in the short term:
1。 Other asset markets are in good condition and funds are taken away (such as the stock market soaring);
The total amount of money in circulation has decreased, and there is no money in any market. But in any case, the total amount of money circulating in the market may eventually become smaller. Because the main investors in US Treasury bonds are commercial banks. The more national debt a bank has, the more loans it gets from the central bank. When the yield of national debt rises, the cost of obtaining funds for commercial banks will rise, and the funds for loans will be less, which will lead to a series of financial shortages. With the increase of mortgage interest rate and enterprise loan interest rate and the decrease of capital allocation, residents and enterprises are reluctant to invest more debt, which eventually leads to the decrease of funds in any market.