Central Bank: The impact of rising U.S. bond yields on my country is limited and controllable
Our reporter Liu Qi
Since the beginning of this year, US Treasury yields have risen rapidly.
According to data released by the People’s Bank of China (hereinafter referred to as the Central Bank), on January 6, the 10-year U.S. Treasury yield exceeded 1% for the first time since March 2020; on March 31, it rose to 1.74%, compared with last year. The 0.51% low rose by about 120 basis points, up 83 basis points from the end of last year.
The Central Bank stated in the report on the implementation of China's monetary policy for the first quarter of 2021 (hereinafter referred to as the "Report") recently released, that the rise in U.S. Treasury yields has both inflation expectations and rising real interest rates.
At the same time, the central bank pointed out that “on the whole, the impact of rising U.S. bond yields and future Fed monetary policy adjustments on my country is limited and controllable”.
Wang Youxin, a senior researcher at the Bank of China Research Institute, said in an interview with a reporter from the Securities Daily that at present, the global low interest rate environment will continue for some time.
Chinese enterprises can make full use of this financing environment, actively adjust the asset-liability structure, make full use of international low-cost funds to serve the development of the real economy on the basis of reasonable control of the debt currency and term structure, and use exchange rate, interest rate derivatives and other tools to avoid International financial market volatility risk.
"The rise in U.S. Treasury yields has both inflation expectations and real interest rate increases." The central bank pointed out in the "Report" that since the beginning of this year, the real interest rate measured by the U.S. 10-year Inflation Protection Bond (TIPS) yield has risen 46 times. From the basis point to -0.63% at the end of March, the difference between the 10-year U.S. Treasury yield and the real interest rate rose by 37 basis points. The latter usually reflects inflation expectations.
Increased fiscal stimulus and increased economic recovery expectations are the common cause of inflation expectations and rising real interest rates.
As the vaccination process continues to advance, the overall global economy is recovering steadily.
In April, the IMF released an updated "World Economic Outlook Report", which raised the global economic growth forecast for 2021 from 5.5% in January to 6.0%, and the U.S. economic growth forecast from 5.1% to 6.4%.
Regarding the follow-up trend of U.S. bonds, Tao Jin, deputy director of the Macroeconomic Research Center of Suning Financial Research Institute, analyzed in an interview with a reporter from Securities Daily that the current 10-year U.S. Treasury yield is at around 1.62%, which is already at a relatively high level. A slight shock for a month and a half
Therefore, U.S. Treasury yields may face the threshold of continuing upward in the short term, and there is resistance to the upward trend.
"In the medium term, the US Treasury Department’s issuance of US Treasury bonds has not decreased significantly, and the Fed is expected to maintain its bond purchase rhythm in the second and third quarters. Therefore, from the perspective of supply and demand, the supply of US Treasury bonds may still be slightly larger than the purchase demand, pushing up yields. At the same time, the global economy continues to recover in the medium term. There is momentum for rising US real interest rates, and inflation will remain longer than previously expected. From this we can see that there is still room for medium-term US debt to rise." Tao Jin said.
In Wang Youxin's view, U.S. bond yields may fall in the short-term, continue to rise in the medium-term, and return to the trend level dominated by fundamentals in the long-term.
The central bank stated that my country has become the world's second largest economy, with good economic resilience, large room for maneuver, and robust economic operations.
Facing the severe impact of the new crown pneumonia epidemic in 2020, my country is the only major economy in the world to achieve positive economic growth, and it is also one of the few major economies that implement normal monetary policies. It has emerged from a wave of independent markets.
At the same time, with the deepening of the reform of exchange rate marketization, the flexibility of the RMB exchange rate has been further strengthened, and it has better played its role as an automatic stabilizer for the macro economy and balance of payments.
Since 2021, my country's financial market has been operating smoothly, the RMB exchange rate has floated in both directions, and cross-border capital flows have been generally balanced.
At the same time, the central bank emphasized that “the key to the next step is to do its own affairs well. Monetary policy must take the lead, maintain the initiative of monetary policy, cherish the normal monetary policy space, and at the same time pay close attention to changes in the international economic and financial situation, and strengthen cross-border policies. Macro-prudential management of foreign capital flows, strengthen the flexibility of the RMB exchange rate, and carry out international macro-policy coordination based on China.”
In Tao Jin’s view: “my country’s macro policy should be'mainly on me', and at the same time, it should also take into account the global demand stimulus under loose liquidity conditions and the risk of imported inflation arising from rising commodity prices, and actively respond to it. For example, strengthening trade policy adjustments, expanding overseas industrial chains, etc." (Securities Daily)