Since the beginning of this year, driven by the aggressive interest rate hike of the Federal Reserve, the yield of US bonds has risen rapidly, and the yield curve of China and the United States has "double upside down": first, the yield curve of US bonds is partially upside down; Second, the yield curve between China and the United States showed a wide range of upside down, and the US debt interest margin quickly turned negative in the 2-10-year period. In this context, in March, the net outflow of foreign capital under the land stock connect was 46.1 billion yuan, and the custody data showed that foreign capital sold 112.5 billion yuan of Chinese bonds. In April, the RMB also depreciated against the US dollar.
Under high inflation, the Fed's median forecast for raising interest rates this year reached 175bp for seven times, reaching the high point of this round of interest rate increase cycle of 2.5-3% by the middle of next year, while the expectations of market institutions are more aggressive. However, after the short-term sprint, there is still great uncertainty in the policy path of this round of interest rate increase cycle of the Federal Reserve. First, as a demand management tool, monetary policy is difficult to deal with the supply shock caused by geopolitical conflict. Second, the upside down of the term spread of the US yield curve is a strong signal of economic recession, which is bound to restrict the rhythm of subsequent interest rate hikes. Third, raising interest rates could lead to unprecedented losses for the Fed. Fourth, a substantial increase in interest rates will put pressure on the US public finances. The Fed is likely to slow down the pace of raising interest rates in the second half of the year, waiting for the end of geopolitical conflicts and the endogenous repair of the global supply chain.
Relatively speaking, the relaxation rhythm of China's monetary policy shows restraint. There may be three reasons: first, the capital is in a reasonable and abundant state. Second, the current downward pressure on the economy mainly comes from the suspension of production and the damage to the supply chain, and monetary easing is powerless. Third, China's aggressive monetary policy is constrained by the US Federal Reserve.
Under the "triple pressure" combined with the impact of the epidemic, it is more difficult to achieve the annual growth target of 5.5%. How should we break the situation? First of all, the urgent task is to restore economic and social life as soon as possible. Secondly, we should properly resolve the development problems of the real estate industry. Third, allow the RMB exchange rate to depreciate moderately from its current position. Finally, the most difficult thing is to bridge the gap from "wide currency" to "wide credit" through active policy measures. Fundamentally speaking, only by doing our own things well can we better deal with the impact of the external environment. We urgently need to further emancipate our minds, seek truth from facts, return to the theme of market-oriented reform, adhere to the hard truth of economic development and stabilize the overall economic and social situation.
