1. What is the yield of American bonds? Under what circumstances does the rate of return fall?
(1) What is the rate of return?
In general, we know that the yield of bonds is basically fixed. For example, the face value of the bond is 100 and the yield is 4, which means I can get 104 yuan after the bond expires.
Under normal circumstances, the yield of long-term treasury bonds is higher than that of short-term treasury bonds, which is equivalent to our deposits, and the long-term interest rate is always higher than the short-term interest rate.
Only in the national debt trading market will this situation change. Because there are always people selling or buying bonds in the market, the more people buy bonds, the higher the bond price; There are many sellers, and the bond price falls.
Moreover, because the yield after the maturity of the bond is fixed, according to the example just now, I bought a bond with a face value of 100, and I can only get 104 yuan after the maturity. In other words, if the bond price rises in the market fluctuation, my yield will fall; Similarly, bond prices fell and yields rose.
For example, I spent 10 1 yuan to buy bonds with face value of 100 in the market, but I can only get 104 yuan at maturity, and the income is only 3 yuan, and the yield is obviously less than 3%, which is the decline of the yield.
(2) Under what circumstances does the rate of return fall?
As I said just now, when the price of national debt rises, the yield will naturally fall. This often happens for several reasons:
First, when the economy goes down, or the economic expectation is pessimistic, the market thinks that there are risks in the short-term economy and there is demand for hedging, and funds will enter the long-term national debt market, thus making the price of long-term national debt rise and interest rates fall. This is what is happening now.
Second, the Fed's subjective control over the economy, such as operation twist, artificially lowering long-term interest rates and releasing liquidity by selling short-term treasury bonds and buying long-term treasury bonds.
The third is the market's bet and arbitrage on the Fed's regulation. For example, it is expected in advance that the Fed's operation will depress the interest rate of government bonds, thus buying a large number of long-term government bonds, and then selling them when the Fed prints money to buy government bonds, thus making a profit.
In the macro-economy, if the yield of long-term government bonds is depressed to a certain extent, and it is upside down with the yield of short-term government bonds, it means that the economic recession is not far away.
Second, the current decline in the rate of return represents the downward pressure on the US economy.
(1) The downward trend of the economy is obvious.
This year is what most economists think, the year when the global economic recession began. In this context, pessimistic expectations for the US economy have also flooded since the beginning of the year.
Although from the economic data, the economic growth of the United States is still very strong, and the non-agricultural data has also maintained a historical high, but after all kinds of data, the market is extremely pessimistic about the economy.
This is because from 20 17, the growth of American manufacturing industry began to decline, and this round of economic growth in the United States was driven by the recovery of manufacturing industry. This means that the endogenous growth momentum of the US economy has failed. Therefore, we can see the continuous decline of pmi in the United States, which is the most direct feeling of the market on the economic prospects.
At the same time, there are temptations behind non-agricultural data. The United States has maintained a low non-agricultural unemployment rate for a long time, but historically, if the non-agricultural unemployment rate is lower than the natural unemployment rate of 4.5% for 32 months, it will fall into a new round of recession. Now the non-agricultural data has been good for 28 months, so the recession in the United States seems inevitable sooner or later.
(2) The consequences of "hawkish interest rate cuts".
At the end of July, the Federal Reserve decided to cut interest rates. This was originally a very favorable decision for the market.
However, after the meeting on interest rates, the Federal Reserve issued hawkish remarks: First, it said that the economic situation was relatively good; Second, it is said that this interest rate cut is one-off, not the beginning of the interest rate cut cycle.
Such remarks immediately led to a sharp drop in the stock market, and market expectations were even more pessimistic.
In particular, US stocks, due to deviation from fundamentals, are currently supported by the expectation of interest rate cuts. Now the expectation of interest rate cuts has been broken, and the speculative funds accumulated before have been withdrawn, leading to a rapid decline in US stocks.
This allows the market to verify its own expectations and think that the systemic risk of finance is close at hand. Since then, the yield of American bonds has been rising. The previous news broke through the low point since 20 15 1 1; Now it has broken through the low point since August 2065438+2005. Where is the next breakthrough?
Fortunately, we can expect to cut interest rates.
Third, the probability of a rate cut in September has greatly increased.
Although the Fed denied to start the interest rate cut cycle after the last rate cut, from the current situation, I am afraid that the Fed will be forced to cut interest rates again under the pressure of the market, and even start the interest rate cut cycle in September.
(A) the pressure brought about by the economic downturn
As I said just now, the decline in the long-term yield of US debt is not only a simple national debt market, but also reflects the market's pessimism about future economic expectations.
It can be said that the United States has now reached the end of the economic growth cycle, which is obvious to all. From this point of view, the Fed should cut interest rates in advance instead of in July.
Under the pressure of economic downturn, I am afraid that interest rate cuts will still come.
(B) the pressure of upside-down rate of return
The decline in long-term bond yields in the United States is not only a simple reflection of economic expectations, but also a potential risk of interest rate inversion.
When the price of long-term bonds continues to fall, even lower than the yield of short-term bonds, we call it yield inversion, which shows a more gentle trend on the yield curve. This trend, first of all, indicates the emergence of the risk of economic recession, and second, promotes the Fed to cut interest rates as soon as possible.
/kloc-the spread between 0/0-year treasury bonds and 3-month treasury bonds turned negative, which historically prompted the Federal Reserve to cut interest rates. The reason is that this kind of interest rate inversion will often be transmitted to other financial markets, leading to an increase in interbank spreads and credit spreads, which may lead to a full-scale outbreak of financial risks.
The shortage of credit and liquidity in the financial system will make the Fed take interest rate cuts as a response, which is what we call "lagging interest rate cuts". And if the upside-down US bond yield continues to deteriorate, maybe we will see a new situation:
The last interest rate meeting was "preventive interest rate cut", and the next meeting was "delayed interest rate cut".
But in any case, with the stock market falling and the interest rate of long-term government bonds falling, the possibility of interest rate cuts is increasing.
To sum up, the long-term decline in the yield of US bonds comes from the expected pressure of pessimistic economic prospects, and the short-term decline in the yield was aggravated by the hawkish interest rate cut in July, which failed to meet market expectations. The continued decline in yields may greatly increase the probability that the Fed will cut interest rates in September.