Treasury 10Y finally bounces, real interest rate bottom confirmed: Treasury 10Y finally bounces, trading at 1.51% at press time. In the past four consecutive trading days, the US Treasury 10Y rose about 21Bps, in which inflation expectations and real interest rates contributed about 10Bps respectively. The difference is that inflation expectations are in a peak-downward trend, while real interest rates are in a peak-upward trend. We believe that:
(1) The bottom of the real interest rate in the third quarter is confirmed to be a necessary but not sufficient condition for the us bond rebound. We have judged the trend of the real interest rate earlier than the market (refer to the previous report “The US Real interest rate will reach the inflection point in the third quarter 20210716”).
(2) To judge whether the 10Y rebound of US treasuries can be sustained, on the one hand, it depends on whether the rebound of real interest rate can be sustained. Since the impact of COVID-19, the real interest rate has bottomed three times, and the pattern of bottoming has been hovering for more than one year since August to September 2020. On the other hand, it depends on whether the inflation expectation will suddenly stall at a high level. In May 2021, the inflation expectation will reach the total top of 2.5%~2.6% in the two rounds of expansion since 2003 — expansion period 1 (2003.3-2007.12) and expansion period 2 (2009.7-2020.2), and then the trend will fluctuate downward.
(3) In our previous report, “Us monetary and fiscal will be” adaptable “20210924”, we expressed the view that the market has finally reached a consensus that the Fed can “adapt” to the market. It is no coincidence that the US bond 10Y has finally broken the half-integer 1.5%. And we think the probability of reaching the original $3.5 trillion revenue and spending bill on the fiscal side is low, but will be “adaptive” as well. By “adapting” we mean adjusting to a stronger fundamental that can sustain both the Taper and a smaller fiscal stimulus than expected. , on the other hand, we should also realize that a group of “fitness” combination of monetary, fiscal, from the total demand side on inflation (and inflation expectations) a lasting inhibitory effect, to match the supply side in the air, the two aspects of mismatch, lagging behind the Cost of fuel type (Cost pushing) inflation of relief, It also reflects the characteristics of “adaptation” from another perspective.
2021Q4 asset price trend judgment: With THE US bond 10Y breaking the half-integer 1.5%, German bond 10Y rising to -0.195%, Japanese bond 10Y rising to 0.063%; China Bond 10Y followed slightly to 2.895%; Dollar rising, euro, yen falling; Us stocks rebound, Europe, Japan to follow; In terms of commodities, gold continued to come under pressure, with cloth oil approaching $80 / BBL for the first time in two years.
(1) We still stick to our previous core view: “Inflation expectations are pealling out, real interest rates are bottoming out”, us Treasury bond 10Y is “slowly” rising, and we raised our forecast range for the end of 2021 to 1.6-1.8% (we looked at 1.6-1.8% at the beginning of the year, but later lowered to 1.5-1.7% due to the spread of Delta mutation).
(2) On the whole, th
e “slow” upward trend pattern of 10Y TREASURIES, which bottomed and rebounded with real interest rates, basically came to an end after the impact of Delta mutation in the third quarter. We believe that the global economic resonance, but uneven recovery is still the main recognition, the overall emerging is still unable to catch up with the overall developed pace of recovery, and 2021Q4 is the window period for the market to reach this main recognition consensus.
(3) Looking ahead to 2021Q4, we believe that: The dollar will rise with U.S. debt 10 y “slow”, also welcomed the “slow” rise, in the long term rebound in crude oil, copper or frustrated by real interest rates, inflation expectations of top, and the imbalance of the global recovery factor and resistance, medium-term needs to pay attention to the global energy shortage, the supply side bottlenecks caused by the upward shock pulse type, gold or frustrated by real interest rates rebound and usher in a consolidation, While a small pullback in U.S. stocks is inevitable, the broad monetary environment with ample liquidity and a broad consensus that the cycle is early to mid-cycle may still favor sustained strength in U.S. stocks.
Risk tips :(1) global “re-inflation” exceeds expectations; (2) The impact of Delta mutation on economic activities was more than expected; (3) Geopolitical risks exceed expectations.