Recently, interest rates on long-end US treasury bonds have continued to rise, which has once again become the focus of market attention.Since September, interest rates on long-term and short-end US treasury bonds have diverged, with one-year Treasury rates still hovering low, while 10-year Treasury rates continue to rise. As of October 8, the interest rate on 10-year Treasuries was 1.61%. It is already very close to the high of the year in March this year. At the same time, since September, the three major indexes of US stocks fluctuated and closed down slightly, so the impact of a sharp rise in US bond interest rates on the equity market has once again become the focus of market attention.

We believe that the introduction of Taper to the agenda is an important reason for the recent rise in interest rates on US Treasuries.On September 22nd, the Fed released a statement from its September FOMC meeting that it would keep the federal funds rate (0-0.25%) and the size of asset purchases ($80 billion of treasury bonds and $40 billion of MBS per month) unchanged. Then Powell said in an interview that the Taper would end in the middle of next year, and there is a strong consensus in the market for the Fed to announce the opening of Taper after the November interest rate meeting.

In addition, rising commodity prices and higher inflation in the United States are also important support for the rise in interest rates on U.S. Treasuries.Affected by the COVID-19 epidemic last year, the global economy fell sharply, and commodity prices also reached a low in the first half of last year. But since the second half of last year, as the epidemic has been brought under control, the global economy has continued to recover and commodity prices have risen sharply. While commodity prices are rising, US inflation is also starting to rise. The latest US CPI and PPI in August were 5.3 per cent and 8.3 per cent respectively from a year earlier, both at their highest levels since 2010.

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

Judging from the historical experience of U. S. stocks with rising interest rates since the 1980s, the S & P 500 index has a higher probability of closing higher during the upward period of interest rates.In the seven upward periods of US bond interest rates we counted, the S & P 500 only fell slightly in two times, and rose significantly in the other five times, and in one month, three months and six months after the US bond interest rate peaked. The S & P 500 is also not bad.

From the previous US debt interest rate upward A-share market performance, wind all-An also closed higher probability in the interest rate upward period, structurally, the performance of information technology and consumer sectors is relatively good.In the four upward periods of US bond interest rates we counted, wind all-An only fell slightly in one time, and rose to a large extent in the other three times, and wind all-An also performed well in 1 month, 3 months and 6 months after the US bond interest rate peaked.

Market performance during the upward period of interest rates on US Treasuries

Recently, interest rates on long-end US treasury bonds have continued to rise, which has once again become the focus of market attention.Since September, interest rates on long-term and short-end US treasury bonds have diverged, with one-year Treasury rates still hovering low, while 10-year Treasury rates continue to rise. As of October 8, the interest rate on 10-year Treasuries was 1.61%. It is already very close to the high of the year in March this year. At the same time, since September, the three major indexes of US stocks fluctuated and closed down slightly, so the impact of a sharp rise in US bond interest rates on the equity market has once again become the focus of market attention.

We believe that the introduction of Taper to the agenda is an important reason for the recent rise in interest rates on US Treasuries.On September 22nd, the Fed released a statement from its September FOMC meeting that it would keep the federal funds rate (0-0.25%) and the size of asset purchases ($80 billion of treasury bonds and $40 billion of MBS per month) unchanged. Then Powell said in an interview that the Taper would end in the middle of next year, and there is a strong consensus in the market for the Fed to announce the opening of Taper after the November interest rate meeting.

In addition, rising commodity prices and higher inflation in the United States are also important support for the rise in interest rates on U.S. Treasuries.Affected by the COVID-19 epidemic last year, the global economy fell sharply, and commodity prices also reached a low in the first half of last year. But since the second half of last year, as the epidemic has been brought under control, the global economy has continued to recover and commodity prices have risen sharply. While commodity prices are rising, US inflation is also starting to rise. The latest US CPI and PPI in August were 5.3 per cent and 8.3 per cent respectively from a year earlier, both at their highest levels since 2010.

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

Judging from the historical experience of U. S. stocks with rising interest rates since the 1980s, the S & P 500 index has a higher probability of closing higher during the upward period of interest rates.In the seven upward periods of US bond interest rates we counted, the S & P 500 only fell slightly in two times, and rose significantly in the other five times, and in one month, three months and six months after the US bond interest rate peaked. The S & P 500 is also not bad.

Judging from the previous A-share market performance of US bond interest rates, wind all-An also has a higher probability of closing higher during the interest rate upward period.In the four upward periods of US bond interest rates we counted, wind all-An only fell slightly in one time, and rose to a large extent in the other three times, and wind all-An also performed well in 1 month, 3 months and 6 months after the US bond interest rate peaked.

Structurally, information technology and consumption sectors in the A-share market performed relatively well during the upward period of US bond interest rates.From December 2008 to March 2010, information technology (153%), optional consumption (150%) and raw materials (113%) led the rise in the A-share market. From July 2012 to December 2013, information technology (60%), health care (41%) and optional consumption (35%) led the rise in the A-share market. In the A-share market from July 2016 to October 2018, the financial sector (12%) bucked the trend, while essential consumption (- 2%) and energy (- 4%) were also more resilient.