Recently, interest rates on US long-term treasury bonds have continued to rise, once again becoming the focus of market attention.Since September, interest rates on US long-term and short-term treasury bonds have diverged. Among them, interest rates on US 1-year treasury bonds are still hovering at a low level, while interest rates on 10-year treasury bonds have continued to rise. As of October 8, interest rates on 10-year US Treasury bonds have recorded 1.61%, which is already very close to the high of March this year. At the same time, since September, the trend of the three major US stock indices has fluctuated and closed down slightly. Therefore, the impact of the sharp rise in interest rates on US bonds on the equity market has once again become the focus of market attention.

We believe that the Fed's proposal to raise the Taper schedule is an important reason for the recent rise in interest rates on US bonds.On September 22, the Federal Reserve announced the September FOMC meeting statement, continuing to keep the federal funds interest rate (0-0.25%) and asset purchase scale ($80 billion in treasury bonds and $40 billion MBS per month) unchanged. Afterwards, in an interview, Powell said that Taper will end in the middle of next year. Currently, the market has a strong consensus on the Fed announcing the launch of Taper after the November interest rate meeting.

Furthermore, rising commodity prices and higher US inflation are also important supports for rising interest rates on US debt.Affected by the COVID-19 pandemic last year, the global economy fell sharply, and commodity prices also reached a low point in the first half of last year. Since the second half of this year, as the epidemic has been gradually brought under control, the global economy has begun to continue to recover, and commodity prices have also risen sharply. At the same time as commodity prices are rising, US inflation has also begun to rise. The latest US CPI and PPI for August were 5.3% and 8.3% year-on-year, respectively, both at historic highs since 2010.

In fact, historical experience also shows that rising interest rates on US debt are often accompanied by a recovery in US economic growth, a rise in the inflation rate, and a tightening of the Fed's monetary policy.Since 1982, the US has experienced significant increases in the following seven stages in the 10-year period: (1) April 1983 to June 1984; (2) August 1986 to September 1987; (3) January 1994 to November 1994; (4) September 1998 to May 2000; (5) December 2008 to March 2010; (6) July 2012 to December 2013; (7) July 2016 to October 2018. And in most cases, we have found that rising interest rates on US debt are often accompanied by a recovery in the US economy, higher inflation, and a tightening of the Fed's monetary policy.

Judging from the historical experience of US stocks where interest rates on US bonds have risen since the 80s of the last century, there is a high probability that the S&P 500 index will close during periods of rising interest rates.In the 7 US bond interest rate periods we have counted, the S&P 500 index only experienced a slight decline 2 times. The remaining 5 times all showed a significant increase, and in the 1, 3, and 6 months after the US bond interest rate peaked, the S&P 500 index also performed quite well.

Judging from the A-share market performance where interest rates on US bonds have risen over time, there is a high probability that Wind Quan A will also close during periods of rising interest rates. Structurally, sectors such as information technology and consumption have performed relatively well.During the 4 US bond interest rate increases according to our statistics, Wind A showed a slight decline only 1 time, and the remaining 3 times all showed a significant increase. Also, in the 1 month, 3 months, and 6 months after the US bond interest rate peaked, Wind A also performed quite well.

Market performance during periods of rising interest rates on US Treasury bonds

Recently, interest rates on US long-term treasury bonds have continued to rise, once again becoming the focus of market attention.Since September, interest rates on US long-term and short-term treasury bonds have diverged. Among them, interest rates on US 1-year treasury bonds are still hovering at a low level, while interest rates on 10-year treasury bonds have continued to rise. As of October 8, interest rates on 10-year US Treasury bonds have recorded 1.61%, which is already very close to the high of March this year. At the same time, since September, the trend of the three major US stock indices has fluctuated and closed down slightly. Therefore, the impact of the sharp rise in interest rates on US bonds on the equity market has once again become the focus of market attention.

We believe that the Fed's proposal to raise the Taper schedule is an important reason for the recent rise in interest rates on US bonds.On September 22, the Federal Reserve announced the September FOMC meeting statement, continuing to keep the federal funds interest rate (0-0.25%) and asset purchase scale ($80 billion in treasury bonds and $40 billion MBS per month) unchanged. Afterwards, in an interview, Powell said that Taper will end in the middle of next year. Currently, the market has a strong consensus on the Fed announcing the launch of Taper after the November interest rate meeting.

Furthermore, rising commodity prices and higher US inflation are also important supports for rising interest rates on US debt.Affected by the COVID-19 pandemic last year, the global economy fell sharply, and commodity prices also reached a low point in the first half of last year. Since the second half of this year, as the epidemic has been gradually brought under control, the global economy has begun to continue to recover, and commodity prices have also risen sharply. At the same time as commodity prices are rising, US inflation has also begun to rise. The latest US CPI and PPI for August were 5.3% and 8.3% year-on-year, respectively, both at historic highs since 2010.

In fact, historical experience also shows that rising interest rates on US debt are often accompanied by a recovery in US economic growth, a rise in the inflation rate, and a tightening of the Fed's monetary policy.Since 1982, the US has experienced significant increases in the following seven stages in the 10-year period: (1) April 1983 to June 1984; (2) August 1986 to September 1987; (3) January 1994 to November 1994; (4) September 1998 to May 2000; (5) December 2008 to March 2010; (6) July 2012 to December 2013; (7) July 2016 to October 2018. And in most cases, we have found that rising interest rates on US debt are often accompanied by a recovery in US economic growth, a rise in the inflation rate, and a tightening of the Fed's monetary policy.

Judging from the historical experience of US stocks where interest rates on US bonds have risen since the 80s of the last century, there is a high probability that the S&P 500 index will close during periods of rising interest rates.In the 7 US bond interest rate periods we have counted, the S&P 500 index only experienced a slight decline 2 times. The remaining 5 times all showed a significant increase, and in the 1, 3, and 6 months after the US bond interest rate peaked, the S&P 500 index also performed quite well.

Judging from the A-share market performance where interest rates on US bonds have risen over time, there is a high probability that Wind Quan A will also close during periods of rising interest rates.During the 4 US bond interest rate increases according to our statistics, Wind A showed a slight decline only 1 time, and the remaining 3 times all showed a significant increase. Also, in the 1 month, 3 months, and 6 months after the US bond interest rate peaked, Wind A also performed quite well.

From a structural point of view, sectors such as information technology and consumption in the A-share market performed relatively well during the period when interest rates on US bonds rose.From 2008/12 to 2010/3, the three sectors of the A-share market, information technology (153%), optional consumption (150%), and raw materials (113%) led a sharp rise. From 2012/7 to 2013/12, the three sectors of the A-share market, information technology (60%), healthcare (41%), and optional consumption (35%) led a sharp rise. From July 2016 to October 2018, the financial sector (12%) of the A-share market bucked the trend and closed, and the performance of essential consumption (-2%) and energy (-4%) were also relatively resistant to decline.