The agency has made four-year judgments since 2017: a bull-bear transition year in 2020 and a bond bear market in 2021. This judgment is very accurate in the trend of US debt. In 2022, US debt continued the bear market trend of 2021 and continued to adjust sharply, with 10-year Treasury yields as high as 2.85%. Where will the yield of US Treasuries adjust this round? This paper will analyze it from the following angles.

1. Review of the last Fed tightening cycle

From the Taper signal in May 2013, the last Fed tightening cycle took about five and a half years to raise interest rates for the last time by the end of 2018.The 10Y yield closed at 1.66% on May 1, 2013, to a high of 3.24% on November 8, 2018, a total of about 160bp, during which the 10Y yield curve showed an "M" trend, hitting two highs in December 2013 and November 2018 and a low in July 2016.

two。 The differences in the current cycle

(1) the monetary policy framework is different:In August 2020, the Fed's monetary policy framework was adjusted to the average inflation system. Under the new monetary policy framework, the Fed's focus on employment levels has shifted from bias to gap and increased acceptance of inflation.

(2) Taper expectations are different:In the last tightening cycle, because the Fed did not communicate fully with the market beforehand, the Fed suddenly released the Taper signal in May 2013, causing the market to "shrink panic". In this tightening cycle, the Fed communicates with the market, superimposing the "learning effect", and US bond yields are expected to move out of a single-peak "inverted V" trend.

(3) different levels of economic growth:By all measures, the current US economic performance is stronger than during the last round of austerity.

(4) different levels of inflation:The inflation performance of the last tightening cycle is obviously different from that of the current one. After the financial crisis, the real monetary growth was limited, and the inflation center fell; while after the epidemic, the Federal Reserve and finance cooperated with the quantitative easing policy of increasing money massively, which contributed to a significant increase in inflation in the later stage of the epidemic.

3. Forecast the top range of US bond yield from two angles: 3% Mel 3.5%

(1) to infer from the federal funds rateIn 2018, the highest federal funds rate is 2.5%, the federal funds rate is capped at 3.5%, and the corresponding 2-year high is 2.9%. The 10-year high is 3.24%, and the 10-year yield does not exceed the longer run ceiling.

According to the latest March bitmap released by the Federal Reserve, the range of increase in the federal funds rate in 2022 is 1.6% Mel 2.4%, with an average of 1.9%. In 2023, the range is 2.4% Mo 3.1%, and the average value is 2.8%. If the future long-term federal funds rate maintains the forecast range of March, the yield on 10Y US bonds is expected to reach about 3%. The probability of more than 3.5% is not high at present.

(2) speculate the high yield in this bear market from the point of view of economy, inflation, policy interest rate and so on.

According to the forecasts of the economy, inflation and policy interest rates given by the Fed at the interest rate meeting in March, the GDP, PCE and policy interest rate centers will be 2.8%, 4.3% and 1.9% respectively in 2022, and 2.2%, 2.7% and 2.8% respectively in 2023 GDP, PCE and policy interest rate centers.

In the past 10 years, the comparable year of economic improvement, high inflation and high policy interest rate is 2018. In 2018, the GDP, PCE and policy interest rate center are 2.9%, 2.14% and 2.12% respectively. The bond yield of 2022 and 2023 is slightly higher than that of 2018. The high yield of 10Y US debt in 2018 is 3.24%. This round of bond yield is expected to slightly exceed the 2018 high. But the chances of more than 3.5% are slim.