Core view: three factors promote the recent recovery of yield, but the short-term upward space is limited
Three factors have driven the recent recovery of yield. First, the intensive release of steady growth policies boosted credit expectations, such as the resumption of work and production in Shanghai last week; Liu He deployed ten measures to ensure logistics and supply chain; Financial policies should be strengthened to support entities, especially the readjustment of real estate policies by the central bank and the China Banking and Insurance Regulatory Commission. Second, the Federal Reserve is more hawkish, the interest rate gap between China and the United States continues to hang upside down, and the RMB exchange rate has fallen sharply, further affecting market expectations and monetary policy; Third, the central bank made it clear that it was concerned about prices and the adjustment of monetary policies in major economies.
Pay attention to the strengthening of the above constraints and the convergence of ultra loose funds. In the short term, monetary policy constraints and broad credit expectations continue to ferment. In March, the source of investment funds for real estate development fell by 19.6%, but the decline of self raised funds slowed down. With the statement of the central bank and the China Banking and Insurance Regulatory Commission last week, the end of real estate policy may be gradually clear. The capital is in a super loose state, but there are signs of idling. The total transaction volume of inter-bank pledged repo exceeded 6 trillion yuan in a single day on Wednesday and Thursday. We should be vigilant against the intervention of the central bank. In the medium term, the focus is whether the credit easing can be effective, and the judgment of maintaining the bottom of the economy in the second quarter. In terms of valuation, the current 10Y treasury bond yield is close to the top pushed up by the recovery of economic and financial data in February. To sum up, the yield still has upward risk in the short term, but the space is limited, and the judgment of low interest rate volatility in the second quarter is maintained.
Market review: abundant funds and steep interest rate curve.
Although there was plenty of funds in the 1y end of last week, there was still plenty of funds in the 1y end. The main disturbing factors throughout the week were lower than expected RRR reduction, wide credit at the policy level, loose capital, the expectation of RMB depreciation caused by hawks of the Federal Reserve and the restriction of monetary policy. Specifically: on the 18th (Monday), the yield rose across the board. The RRR reduction announced on April 15 was less than expected, and the central bank clearly expressed concern about prices and internal and external balance, restricting the expectation of further monetary easing; Although most of the March economic data released on the same day fell, Shanghai and other places announced the resumption of production and work, hedging pessimistic expectations to a certain extent. After hours, the central bank and the State Administration of foreign exchange issued the notice on doing a good job in epidemic prevention and control and financial services for economic and social development, and put forward 23 policies and measures to strengthen financial services and support the real economy from three aspects: supporting the relief of distressed subjects, unblocking the national economic cycle and promoting the development of foreign trade exports. On Tuesday, the yield still rose slightly. Mainly due to the disturbance of credit easing expectations and hawkish remarks of Fed officials. On April 19, St. Louis Fed chairman Brad once again made hawkish remarks, saying that the Fed needs to act quickly this year, raise interest rates by 50 basis points several times and raise interest rates to about 3.5%. The possibility of raising interest rates by 75 basis points should not be ruled out. On the 20th (Wednesday), the medium and long-term end was still upward. LPR quotation is stable and disturbs market sentiment. On Thursday, the yield fell across the board. The capital level was extremely loose, and dr007 fell 9bp in a single day. On the 22nd (Friday), the medium and long end returned to the upward trend, and the short end continued to decline. The capital level was very loose, but the RMB showed signs of accelerated depreciation. The central parity rate of the US dollar against the RMB fell sharply to 6.4596 on April 22.
Risk warning: the epidemic development exceeded expectations; Substantial adjustment of real estate policy; Inflation rose sharply; The Fed's interest rate hike and contraction table exceeded expectations; Economic data exceeded expectations.
