01

The Curse of US Treasury Bonds

US stocks continue to be suppressed by the upward trend in US Treasury bond yields. So far this year, US stocks have performed well, with the market betting on a new industrial revolution while maintaining an optimistic outlook on interest rate prospects. However, market concerns about macro factors are now intensifying, with the 10-year US Treasury yield rising sharply in the past few trading days, becoming an inescapable worry for investors.

The upward trend in US dollar interest rates shows a tendency to advance alone. Looking at the interest rate differential between Europe and the US, the interest rate level in the Eurozone has been more moderate, leading to a significant widening of the transatlantic interest rate gap. The euro has also depreciated, while the US dollar has further strengthened. Like the euro, currencies such as the yen and the won have also weakened. The central banks of Japan and South Korea have been keeping an eye on the foreign exchange market and have threatened to intervene, but the effects have been不明显.

The exchange rate of the yen against the US dollar has fallen to the 155 level. The only comforting aspect is that Japan's export performance in March was quite good, with the depreciation of the yen being one explanation. This also seems to imply that the so-called intervention by the Bank of Japan is still mainly verbal, and at the same time, the Nikkei index has risen nearly 15% this year, still leading the major markets. In stark contrast, the MSCI Asia-Pacific Index has erased all of its gains for the year in just this week.

Advertisement

The unilateral upward trend in US Treasury bond yields has also begun to break through the "fundamentals." We generally compare GDPNow with the 10-year US Treasury yield to reflect the interest rate's feedback on the economic fundamentals. Currently, the US GDPNow indicates that the growth rate for the first quarter will be close to 3%, significantly higher than the market's previous forecasts. However, the 10-year US Treasury yield seems to be rising more sharply, largely indicating that the interest rate market is beginning to incorporate more other factors.

02

Repricing of Medium and Long-Term Inflation

One of these factors is the repricing of medium and long-term inflation. Although this is a very academic topic, it is a subject that bond investors must face, especially when the US economy has been performing relatively well. The market has even begun to have new discussions, namely, whether higher interest rates are more beneficial for American households - because the financial assets they hold can earn higher interest income, enough to cover the credit card debt payments they need to make. In other words, the traditionally extravagant Americans, as their wallets become fuller, their cash flow also begins to become more "healthy." Such a theory still requires a lot of research and time to verify, but it is an undeniable fact that the market's doubts about the US economy are increasing.

For the market, another issue is about interest rate cuts. To be frank, the interest rate cut in June has become a mirage, but even if there is a rate cut in the second half of the year, whether the market's view on interest rates can be as optimistic as before is also a question.Going abroad remains a major trend

Influenced by both internal and external factors, the Hong Kong market is under overall pressure. The recent popularity of the "going abroad" concept has slightly decreased due to the impact of export data. Based on the overall economic situation, sellers are not overly worried about the monthly data fluctuations, and the basic logic of the "going abroad" concept has not been shaken.

The most attractive asset in the market is still gold. Many investors think gold is too expensive, but they have to admit that gold is still one of the most logical investment options. This is one of the biggest dilemmas in investment: what you think is good, others also think so. Conversely, the same applies!