At present, the interest rate difference between China and the United States is at the bottom of history. Empirically, the interest rate difference between China and the United States will often rise after it is at a low level. The market is more and more concerned about whether the Chinese bond yield will follow the rise if the Federal Reserve continues to hawk and the US bond yield continues to rise. This report gives analysis and prediction from historical experience.
2010 is the watershed of China US interest rate difference. Before 2010, the correlation between the two is weak. Before 2010, the correlation between the trend of interest rate spread between China and the United States was poor (the correlation coefficient between the two was negative in the eight years from 2002 to 2010), and then the trend of interest rate between China and the United States was more relevant. At the same time, the overall shock region of interest rate spread between China and the United States has expanded (the correlation coefficient since 2010 is 0.6). Therefore, we analyze and trace back with the data since 2010.
Reviewing the five times of interest rate spread expansion, three of them were due to the decline of US bond yield (2010, 2016 and 2019), and the other two (2013 and 2017) were due to the rise of Chinese bond yield.
The difference between the five times of interest rate spread expansion between China and the United States lies in the three times of falling by the yield of US bonds (the first, third and fifth) and two times of rising by the yield of Chinese bonds (the second and fourth). The main reason behind this difference is the economic fundamentals of China and the United States. Only under the macro background of the recovery of China and the United States, the rise of China's bond yield is the reason for the expansion of China US interest rate spread. Otherwise, the decline of US bond yield is the main reason.
From the above, by summarizing the widening performance of the five Sino US interest rate spreads, in the stage of the decline of the US economy, the yield of Chinese bonds is affected by US bonds, and the upward pressure is limited. With the decline of monetary policy and financial subsidies continuously tightened by the Federal Reserve in 2022, as long as the decline of us demand is risky, the continuous steep rise of US bond yield is blocked with the decline of the economy, and the simultaneous sharp rise of China bond yield is unlikely to repair the interest rate gap.
Risk tips: escalation of geographical conflicts, recurrence and large-scale recurrence of epidemics, changes in overseas relations, etc
