(Economic Watch) How long does the inversion of US bond spreads in China last and how much does it affect?

  China News Agency, Beijing, April 12 (Reporter Xia Bin) The inversion of the interest rate spread between China and the United States has attracted market attention.

On the morning of April 11, the US 10-year Treasury bond yield rose to 2.764%, the Chinese 10-year Treasury bond yield was flat at 2.75%, and the Sino-US 10-year bond yield difference turned from positive to negative. first time.

  Looking back at history, 2010 can be seen as a "watershed" for the interest rate spread between China and the United States. Before 2010, the interest rate spread between China and the United States fluctuated greatly and was basically in an inverted state. After 2010, the interest rate spread between China and the United States stabilized and remained positive for a long time. value.

  In fact, except for the 10-year treasury bond, the Sino-US interest rate spread of other maturities has inverted recently.

On March 25, the yield on the U.S. 3-year Treasury bond was 8 basis points higher than the yield on China’s treasury bonds of the same term, which was the first inversion since June 2009; on April 1, the 2-year Sino-U.S. interest rate spread was inverted by 16 basis points .

  Why is the spread inversion?

Wang Youxin, a senior researcher at the Bank of China Research Institute, told a reporter from China News Agency that the inversion of the interest rate gap between China and the United States is apparently due to the fact that the Federal Reserve has accelerated the process of raising interest rates and is about to start shrinking its balance sheet, which has made the long-term yield of US bonds rise rapidly. Differences in the pace of US economic recovery and inflation trends.

  He further said that the current inflation in the United States is at a high point, and the main goal of the Fed's monetary policy is to control inflation, while the inflation rate in China is relatively low, and the domestic monetary policy is mainly focused on promoting growth, especially the current domestic economic growth pressure has increased. , the monetary policy is moderately loose, and the monetary policy of China and the United States is differentiated, resulting in the continuous narrowing or even inversion of the interest rate spread.

  Guan Tao, global chief economist at Bank of China Securities, also pointed out that the United States is experiencing high inflation once in 40 years, and the current level of moderate inflation in China is an important background for the re-dislocation of the monetary policies of China and the United States.

In view of the focus of US monetary policy on "anti-inflation", China's monetary policy is focusing on "stabilizing growth", which is the main reason for the further narrowing of the yield spread between China and the United States.

  How long will the Sino-US interest rate inversion last?

"From the perspective of U.S. inflation and China's economic fundamentals, the narrowing and inversion of the Sino-U.S. interest rate spread may continue for a while." Xie Yaxuan, chief macro analyst at China Merchants Securities, also believes that as the U.S. economy faces a downturn or even recession due to policy tightening Pressure, U.S. bond yields may fall again.

  Wang Youxin said bluntly, considering that the change in the interest rate difference between China and the United States is related to the relative recovery of the economy, driven by the policy and active efforts, it is expected that China's economic recovery will improve in the second half of the year, while the US economy will grow under the influence of rapid interest rate hikes. The speed will slow down, and the recent discussion about the US economy falling into recession is gradually heating up. It is expected that the inverted phenomenon and impact of the Sino-US interest rate gap will gradually ease.

  What are the effects of the inversion of the Sino-US interest rate differential?

Pang Ming, chief strategist of China Renaissance, reminded that the current inversion of the 10-year Treasury bonds between China and the United States is only the nominal interest rate differential. , and the current account still supports the RMB exchange rate.

  He mentioned that due to differences in monetary policies, the book losses of investing in Chinese government bonds are smaller than those of other major countries, which can partially make up for the losses caused by the narrowing of interest spreads or even inversion. Offset by the forward premium of the US dollar, the willingness of foreign investors to hold RMB bonds will remain stable. At present, the proportion of foreign capital in the total bond market is less than 5%, and subsequent interest rate movements will hardly affect the overall trend of RMB bonds.

  "In general, the RMB exchange rate has not seen a unilateral depreciation trend. At this stage, the possibility of a sharp depreciation of the RMB or significant capital outflow is extremely low." Pang Ming said.

  Wang Youxin said that the current continuous narrowing of the interest rate gap between China and the United States has not had a major impact on the RMB exchange rate and cross-border capital flows.

Although the U.S. dollar index exceeded 100, the RMB exchange rate remained stable with a limited correction, and the cross-border capital flow situation was generally stable.

  "Compared with the last round of the Federal Reserve's normalization of monetary policy, the external balance has not changed significantly, and it has not formed too many constraints on the formulation of monetary policy." Wang Youxin said, therefore, China's monetary policy formulation must still adhere to me, It focuses more on promoting domestic economic recovery, structural transformation, smooth operation of industrial and supply chains, and employment growth.

  Pang Ming believes that China's monetary policy needs to continue to pay more attention to the domestic economic situation, insist on coordinating epidemic prevention and control and economic and social development, adhere to policy independence and policy space, strengthen forward-looking operations, stabilize expectations and growth, and maintain economic operation at a reasonable level. We will continue to maintain reasonable and sufficient liquidity to provide support for wide credit, while deepening the market-oriented reform of the RMB exchange rate, so as to improve the flexibility of the two-way fluctuation of the RMB exchange rate to better cope with the impact of capital flows, and firmly promote the two-way opening of the financial market.