Government bond ETF
- 1047.694
- +1.015+0.10%
In October, China's holdings of US Treasury bonds hit their lowest level in over 15 years! Is the trend of reducing US Treasury bonds beginning to spread Global?
① On Thursday local time, the USA Treasury released the International Capital Flow Report (TIC) for October 2024; ② The report showed that the amount of US Treasury bonds held by foreign investors ended five consecutive months of growth in October; ③ Led by Japan and China, as many as seven of the top ten "creditors" of the USA chose to reduce their Shareholding that month. Meanwhile, China's US Treasury Hold Positions further hit a new low since 2009.
The central bank's discussions with some "aggressive trading" Institutions have shaken the market; who are the Block Orders in this round of bond bull market? State-owned large banks have received the most "attention".
① The central bank's morning consultations mainly involved Institutions based in Beijing, with very few Institutions from other cities attending the meeting, including cities like Shanghai where asset management Institutions are concentrated. ② In the past two weeks, the Block Buy Institutions for 10-year government bonds have shifted from Fund to Banks. ③ As incremental policies come into effect, the likelihood of economic stabilization increases, necessitating a reduction in expectations for the bond market in 2025.
Is the market too conservative? Bond traders expect the Fed to cut rates four times in 2025.
In terms of interest rate Options, some traders bet that the market's view is too hawkish, and the Federal Reserve will be closer to its September forecast: four rate cuts in 2025, each by 25 basis points, which would bring the implied federal funds target rate down to 3.375%. Some analysts believe that if Powell adopts a hawkish tone during the press conference, the rise in Bonds yields may be disrupted.
After breaking three barriers, the 10-year government bond hovers around the 1.7% integer mark, and multiple Institutions have begun to issue "warnings": the downward space is limited.
① On one hand, previous Trades have fully realized expectations such as interest rate cuts, and on the other hand, the market mostly anticipates that 1.7% is the latest intervention threshold by the regulators. ② At the end of the year, with the recovery of the economic fundamentals, some Institutions have changed their expectations for a strong ramp-up of stimulus policies in the short term. ③ A further significant decline in interest rates may require the new expectations for a round of MMF easing after the interest rate cuts are implemented.
FOMC Likely to Cut Rates by 25bps
The bond market is experiencing a "super week," with the 30-year Treasury Bond ETF rising more than 20% this year, and institutions state that volatility may continue after the New Year.
① The bond market experienced a "super week" of policy and trade; ② The 30-year Treasury Bond ETF saw an increase of over 3% in a single week, with an annual ROI of 20%; ③ Institutions do not have strong profit-taking motivation in the short term, and volatility may occur after the New Year.
The interest rates of the same industry certificates of deposit are rapidly declining, and under "moderately loose" conditions, there is hope to drop to 1.30%.
1. After the improvement in MMF transmission efficiency, the CD interest rate and the 7-day OMO rate will integrate within the next year. 2. Due to the faster decline of long-term bonds, the spread between the 10Y government bond and the 1Y CD has been compressing, and is currently at 13BP.
Bonds are referred to as the "God of War" in the market, with the 30-year government bond yield breaking "2" during trading, accelerating at the end of the year.
① Although the Fund made several profit-taking operations on government bonds earlier this week, there is still a net Buy of long-term government bonds overall, and Insurance Institutions also joined in the rush to buy bonds. ② The extent of monetary easing determines the upward potential of the bond market; as long as interest rate cuts are on the way, the bond market can remain optimistic. There may be a reserve requirement ratio cut before the end of the year.
The Nasdaq fell to 0.02 million points, Adobe plummeted more than 13%, the China concept Index rose against the trend, and Bitcoin dropped below 0.1 million dollars.
In November, USA PPI inflation exceeded expectations, with the market betting on a pause in interest rate cuts in January next year. The Dow has fallen for six consecutive days, with NVIDIA experiencing the largest drop of 2.5%. Tesla, Meta, Google, and Amazon have moved away from their highs, uranium mining stocks have declined, but Apple reached a new high. Broadcom rose nearly 5% in after-hours trading, and Chinese stocks Baidu and PDD Holdings increased by over 1%. Bond yields in Europe and the USA have risen significantly, and after the European Central Bank cut interest rates, the euro fell to a one-week low, before rebounding. The dollar reached a two-week high, while the offshore yuan once rose over 200 points, breaking through 7.26 yuan. Commodities generally fell, with spot gold down over 2% and spot silver down over 4% during the session.
The Nasdaq hits 20,000 points! Besides US bonds, US investors are buying everything.
After the release of USA's November CPI data on Wednesday, investors seem to have finally "confirmed" that the Federal Reserve's interest rate cut next week is a done deal; financial markets across asset classes on Wednesday also appeared quite uplifting; apart from the decline in USA Treasuries, investors are buying everything else - USA stocks are rising, Gold is rising, the dollar is rising, Crude Oil Product is rising, and Cryptos are rising...
Wall Street interprets the CPI: no change to the Fed's "gradual easing," core inflation remains strong supporting the pause in interest rate cuts in January.
Analysis suggests that the CPI, which meets expectations, demonstrates that the cooling of inflation has basically stagnated in recent months. While this is not enough to disrupt the year-end bull market in U.S. stocks, it also means that an interest rate cut next week is not guaranteed, especially with the potential inflation upward risks brought by Trump's tariffs and fiscal expansion next year drawing attention. The yield on 10-year U.S. Treasuries first fell and then rose.
Here's the Breakdown for November CPI, in One Chart
Tonight! The last piece of potentially market-exploding data from the USA in 2024 is here.
① The USA's November CPI data, which will be released tonight at 21:30 Beijing time, can be metaphorically described as "the last heavyweight economic Indicator of the USA for 2024", which does not seem exaggerated. ② With the Federal Reserve's December monetary policy meeting scheduled for next week, tonight's CPI is expected to serve as an important basis for the Fed's critical decision on whether or not to cut interest rates...
Shanghai Securities Journal: Do not overlook the risks behind the surge in the bond market. "OMO rate + 45 basis points" has become the "new anchor point" for government bonds.
The Shanghai Securities Journal article reminds that the market has fully anticipated the bond market trends. If future policy implementation deviates from expectations, there may be a significant potential for market adjustments. Another article from Shanghai Securities Journal cites analysis that, referring to the bond market pricing habits since July, the 10-year government bond yield is generally determined using an OMO rate plus an additional 40 to 50 basis points as a phased interest rate lower limit. In the future, it can be roughly considered that 'OMO rate + 45 basis points' will serve as the new pricing 'anchor' for the bond market.
Imminent! A giant has once again issued a warning to the governments of Europe and the United States regarding debt, this time it is the central bank of central banks!
This week, major players intensively warned about the debt issues in Europe and the United States. Following bond giant Pimco and Bridgewater's Dalio, the Bank for International Settlements (BIS), known as the central bank of central banks, recently stated that government borrowing habits pose the greatest danger to Global economic stability. The surge in government debt supply could exacerbate instability in financial markets, and the recent changes in market sentiment should be viewed as warning signals.
How long can the surge in the bond market continue?
China Merchants believes that the shift in monetary policy to a "moderately loose" tone suggests that rate cuts are likely next year, opening up space for short-term interest rates to decline. Soochow states that there is a lag at the turning point for stocks and bonds, and before transitioning to a "bull market for stocks and a bear market for bonds," there will be a period of "dual bull markets" for both, expected to arrive next year, with the yield on 10-year government bonds possibly falling to 1.5%.
The national bond interest rate continues to decline to 1.86%, with profit-taking orders to sell, and funds have not significantly loosened.
① When the 10-year government bonds are below OMO + 45bp, the central bank usually increases management efforts or conducts bond trading operations. ② The bond bull market will not easily come to an end, and an overly consistent short-term rhythm may bring some profit-taking pressure.
When the U.S. stock market is infatuated with Trump, U.S. bonds have fallen in love with Besant...
① The usa national debt market, which has reached a scale of 28 trillion dollars, seems to be becoming increasingly "politicized"; ② If the continuous record highs of the us stock market after the usa elections indicate that the bull market is "fond of" Trump, then the current bond market seems to have "fallen in love with" Bessent.
After 14 years, the monetary policy is once again proposing "appropriate easing". How will this affect the stock and bond markets? Public funds are analyzing late at night.
① Beyond the key points, public offerings and brokerages interpreted policy details late at night; ② Looking ahead to next year for A-shares, institutions expect a resonance between sentiment and capital; ③ Regarding the bond market, institutions have a clear bullish perspective.
The financial community's C50 wind index survey shows that institutions predict an increased probability of a rate cut in the near future, with the funding rate central expected to remain stable in December.
① The median forecast for new RMB loans in November is 0.64 trillion yuan, which is a year-on-year decrease of 0.45 trillion yuan; ② The median forecast for new social financing scale in November is 2.58 trillion yuan, which is a year-on-year increase of 0.13 trillion yuan; ③ The market anticipates that the year-on-year growth rate of CPI in November may stop declining and rise, with a minor narrowing of the PPI decline due to the low base effect; ④ The probability of a timely rate cut has increased recently, and there is still a necessity for interest rate cuts.