I believe that many friends have such a question:
I used to say that when the yield of U.S. Treasury bonds falls, ** may rise.
The reality is that the yield on the 10-year Treasury note has fallen from 5% to 41%, but the CSI 300 not only did not rise, but also fell to a new low.
What's going on?
U.S. Treasury yields rose, the CSI 300 fell, U.S. Treasury yields fell, and the CSI 300 fell again.
I just saw an article in "A Soil Dog in the Sea", which explained this phenomenon better and talked to my friends
First of all, there are three important factors that affect the rise and fall of A-shares:
1) Performance growth rate;
2) Overseas Mobility;
3) Domestic liquidity.
Overseas liquidity, everyone knows, look at the changes in U.S. bond yields, which is also the focus of the market recently.
Domestic liquidity, many people will look at the changes in the yield of Chinese government bonds, but in fact, the "year-on-year growth rate of M1" can better reflect domestic liquidity, or changes in the hot and cold situation of the economy.
In the chart, ** is the CSI 300, the green line is the M1 year-on-year growth rate, and the red line is the 10-year U.S. Treasury yield.
You can see a few moments:
1) The ** in 2019 was quite smooth, with U.S. Treasury yields declining and M1 rebounding year-on-year growth
2) From the second half of 2020 to the Spring Festival of 2021, the ** was entangled, the US bond yield climbed, and the M1 year-on-year growth rate was sharply**, mainly pushed up by the strong domestic liquidity, which we now call the "huddle stock bubble";
3) The first 10 months of 2022 were pulled down by U.S. bond yields, when U.S. bond yields rose sharply, and although the domestic M1 growth rate also rebounded, it was not strong enough to recover
4) April to October this year is the most difficult period, the yield of US bonds has risen sharply, the year-on-year growth rate of M1 has continued to decline, and the double kill, it is no wonder that this year is so difficult, so many bottom signals, but ** just can't get up, and the people are constantly wailing;
5) Since November, the suppression of US Treasury bonds has eased, and the yield on the 10-year US Treasury note has fallen from 5% to 41%, but the year-on-year growth rate of M1 is still lying on the ground, not up, to put it bluntly, everyone's confidence in economic recovery is generally insufficient, and the spirit is not high, so the CSI 300 has been pulled down again.
Next, explain whyWhy is the impact of M1 so great?
Look at a concept: m0, m1, m2.
It can be simply thought of as m0 = cash in circulation.
m1 = m0 + corporate demand deposit.
M2 = M1 + Corporate Term Deposit + Resident Savings Deposit + Other Deposits.
The difference between M2 and M1 mainly lies in the changes in corporate time deposits and residents' savings deposits.
Normally, residents have two choices after earning money, first, save it and turn it into a savings deposit, M2 increases, and M1 remains unchanged.
Second, consumption, if enterprises are also optimistic about the economy and expand reproduction, the money earned from residents will generally be deposited into the current deposit account of the enterprise and used to purchase raw materials. At this time, m2 increases, and m1 also increases.
Did you think of anything?
A big news in recent years is that "more and more people are willing to save money, fewer and fewer people are willing to spend, and residents' savings deposits have repeatedly reached new highs".
The result of this is,Although M2 is still growing at a rate of 10%, the growth rate of M1 is getting lower and lower, and it has fallen to 1. in the first 10 months of this year9%, historically low. And "M1-M2 scissors are poor".(M1 YoY Growth - M2 YoY Growth).It is also already at a historically low level, and social risk appetite has decreased significantly.
There may be a lot of technical terms, but here is a summary:
Residents have 2 choices after earning money, 1) consumption, the result is that both M1 and M2 have increased, and the economy is booming, which is reflected in the data, the growth rate of M1 and M2 is not much different;
2) Savings, the result is that M2 increases, M1 remains unchanged, in this case the economic vitality is not so strong, which is reflected in the data, M2 growth rate is much higher than M1.
Now is the second situation, M2 is still increasing at a growth rate of 10%, and there is no shortage of money in society, but because residents are more willing to save than to consume, the growth rate of M1 has dropped to 19%, economic vitality has declined, social risk appetite has decreased significantly, and ** has become lifeless.
Then comes the question,When will the growth rate of M1 pick up?
That's how Mr. Earth Dog explains:
1) The difference between M1 and M2 went to two places: one was the savings of residents, and the other was the "flight overseas".
Note that this "fleeing overseas" does not mean that domestic funds are going abroad, but that foreign trade enterprises are not willing to settle and sell foreign exchange, and the money earned is not willing to be remitted back to China.
The reason is that the return on US dollar assets is higher, and the renminbi has been depreciating before.
But now that the situation is reversed, the renminbi has begun to appreciate, and the yield on US bonds is also falling, and the willingness of enterprises to settle and sell foreign exchange will increase, which will also help to increase the growth rate of domestic M1.
2) The part of household savings depends on the recovery of confidence. Or to put it simply, when the economy stabilizes and recovers, everyone's confidence will be restored, and they will be willing to spend.
3) U.S. bond yields fell, but the domestic growth rate of M1 declined, resulting in ** not rising, and then M1 rising, ** immediately rising, has this situation occurred?
This was the case in the last 2 months of 2018.
At the time, the yield on the 10-year Treasury note was from 32% fell to 27%, but the year-on-year growth rate of M1 is still declining unstoppably, and it was not until January 2019 that the inflection point was seen, and ** also rose in response to the call at the beginning of 2019 and walked a beautiful "V-shape".
If the next M1 inflection point occurs and US Treasury yields continue to fall, a repeat of the beginning of 2019 cannot be ruled out.
4) In addition, I would like to add the risk points.
The situation is still a little different now and in the year.
There is no "yield inversion" in US Treasuries. Before the rate cut, the yield on the 10-year Treasury note was as high as 32%, well above the Federal Reserve's federal benchmark rate (2.).25%-2.5%), after the rate cut, the lowest of the two is to fall to the same level, and there is no situation where the yield on the 10-year Treasury note is lower than the federal benchmark rate.
Now it is different, the "yield inversion" of US Treasury bonds is obvious, and the yield on the 10-year US Treasury note has fallen to 41%, but the federal benchmark rate is still at "5."25%-5.5%", even if next year falls to "4." as scheduled25%-4.5%", which is still higher than the current US Treasury yield.
The U.S. Treasury yield has limited room to fall, so I'm afraid that M1 will rise by then, but the U.S. Treasury yield can't go down, which is a bit embarrassing.
*Disclaimer: The content of the article is for informational purposes only and does not constitute investment advice.