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美联储降息一再落空,美债收益率持续攀升,配置机会如何?

The Fed's interest rate cuts have failed over and over again, and US bond yields continue to rise. What are the allocation opportunities?

Wind ·  May 23 23:06

Source: Wind

The minutes of the May meeting of the Federal Reserve show that participants continue to worry about inflation and may not cut interest rates anytime soon. Interest rates have remained high as the Federal Reserve's interest rate cuts have repeatedly failed this year. The yield on US bonds has already been reflected, and the overall trend is rising. How should US bonds be invested in the later stages?

The Federal Reserve's interest rate cuts have failed over and over

The minutes of the Federal Reserve's May meeting show that participants expect the inflation rate to return to 2% in the medium term, but the anti-inflation process may take longer than previously thought. “Participants observed that, despite easing in inflation over the past year, there has been a lack of further progress in achieving the Commission's 2% target in recent months. The components of inflation in the prices of goods and services have all increased significantly.”

It is important to note discussions within the Commission about possible further interest rate increases. “A number of participants mentioned that they are willing to further tighten policies if the risk of inflation is presented in an appropriate manner”.

Regarding future policy prospects, participants believed that if inflation remains sticky, interest rates will remain high for a longer period of time, or interest rates will be cut when the labor market is unexpectedly weak. This is a tougher position than the March Federal Reserve meeting. At the time, officials judged that policy interest rates might be at the peak of this austerity cycle. Almost all participants thought that if the economy develops as widely as they expected, it would be appropriate to shift policy to a less restrictive position sometime this year.

Goldman Sachs Group CEO David Solomon (David Solomon) said that he currently does not expect the Federal Reserve to cut interest rates this year because the economy has shown greater resilience thanks to government spending. “I still haven't seen convincing data indicating we will cut interest rates,” he said at a Boston College event, adding that he currently predicts “zero” interest rate cuts.

How do US Treasury yields fluctuate?

In anticipation of the Federal Reserve's interest rate cut in the fourth quarter of last year, the yield on various US bonds declined markedly. However, as interest rate cuts continue to fall short this year, and expectations are constantly being pushed back, US bond yields have returned to an upward trend. According to Wind data, short-term 1-year US Treasury yields began at 4.8% this year, and once climbed above 5% to 5.25%. Since then, there has been a decline, and the slow upward trend has recently resumed. Currently, it remains at a high level of 5.16%, which is a marked increase from the beginning of the year.

The medium-term 5-year US Treasury yield is very close to the long-term 10-year US Treasury yield, and the two curves almost coincide. Since this year, it has risen from 3.93% and 3.95%, respectively, to 4.47% and 4.43% now. It is also rising steadily, but it is a significant decrease of 4.7% or more at the end of April. It can be seen that US bond yields are affected by the Fed's interest rate cut expectations. As short-term interest rate cuts fall short, 1-year US bond yields continue to fluctuate at a high level. Medium- to long-term interest rate cuts are inevitable, so medium- to long-term US bond yields fell significantly from the end of April.

What are the late-term US debt allocation opportunities?

According to Shen Fanchao's analysis, in terms of allocation, US bond interest rates may remain high in the first half of the year under the influence of fiscal deficits and the risk of a rebound in inflation; in the second half of the year, against the backdrop of stable demand for US bonds and an increase in the probability of the Fed's interest rate cut, the allocation value of US bonds will gradually become prominent. It is recommended to increase the duration of the allocation period to seize opportunities for mid-line bond prices to rebound during the interest rate cut cycle.

Zhang Hesheng of Shanghai Securities believes that although capital is loose, capital prices are expensive. The US bond yield curve is still inverted. Apart from holding short-term products as bottom positions to obtain high interest rates, the remaining positions can be traded in an appropriate range to obtain capital gains.

Wang Xueheng and Xu Zhenting of Guoxin Securities believe that the further decline in long-term bond interest rates will have to wait for more evidence of economic slowdown. The third quarter may fluctuate in a high range, and interest rates on short- and medium-term US bonds have plenty of room to decline. Recently, US inflation and retail, employment, manufacturing, and real estate data have all cooled down, and the 10-year US Treasury interest rate quickly fell back to around 4.4%. Looking ahead to the third quarter, the heavy fiscal deficit pressure of the US election year will support the lower limit of long-term interest rates. It is expected that the third quarter will fluctuate in a high range of 4.1% to 4.5%. Short-term US bonds are still likely to continue to decline, driven by a steeper trend in interest rate curves. It is more likely that the Fed will cut interest rates 1-2 times during the year, while 2-year interest rates are currently only priced to cut interest rates less than 2 times within the next two years, and the current position has high allocation value.

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