US stocks have plunged, what is the real murder?

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US stocks have plunged, what is the real murder?

2018-12-06 00:25:22 136 ℃

US bond yields are rare upside down

December 3rd US Treasury Market Many people are very shocked. The 2-year US Treasury yield rose by more than 3 basis points to 2.8211%; the 3-year US bond yield rose by less than 3 basis points to 2.8274%; the 5-year US bond yield rose by less than 1 basis point. Reported at 2.8185%; 10-year US Treasury yield fell less than 2 basis points to 2.9697%.

The 3-year and 5-year US Treasury yields have been reversed for the first time in 11 years. The gap between the 2-year and 10-year US Treasury yields has also narrowed to slightly above 15 basis points, the same as the lowest level in 11 years.

In fact, the reversal of the yield curve is often seen as one of the signs of a recession, and banks are at risk of reversing borrowing costs. Short-term debt yields are higher than long-term debt, meaning that long-term investment confidence is weakened. Investors' expectations for future earnings have fallen.

Global stock market volatility

Historically, the rate of return has become a leading indicator, not only for the United States The economic outlook is bleak, and it is likely that the US stock market will also undergo a major adjustment, which will not be good news for the global financial market. Coupled with the recent volatility of US stocks, investors who are very worried about the international economic environment, such as the scared bird.

The three major US stock indexes fell sharply overnight, and the long-term and short-term US bond yields were upside down. This has caused investors to worry about the prospects of the US economy. At the close, the Dow fell 799.36 points, down 3.10%, to 25027.07 points, the biggest one-day drop since October 10; the Nasdaq closed 3.80%, reported 7154.43 points, once again entered the revised area.

< p> S&P 500 index fell 3.24% to 2700.06 points, falling below the 200-day line. The Nasdaq fell 3.8% to 7158.43 points. The Dow and the S&P 500 hit their biggest one-day decline since October 10, and the Nasdaq hit its biggest one-day drop since October 24. The so-called "FAANG" stocks - Facebook, Amazon, Apple, Netflix and Google - have shrunk by more than $140 billion.

Unexpectedly, apart from the US stock market, this "disaster" also affected Europe. And the Asia Pacific stock market. It can be said that the global stock market is already "dead and wounded."

What are the consequences of the rate of inversion?

Today, the influence of the downside of US Treasury yields is already obvious, so what are the consequences for the market next?

Historical data shows that since the 1950s, there have been 10 yields in the United States. In the end, there were nine recessions and the other one occurred in the mid-1960s. US bond yields are upside down to the US recession, usually between 15 and 36 months. In the nine recessions, real GDP growth slowed by an average of 5.6 percentage points from the beginning of interest rate hikes to the low point of economic recession. After the emergence of these 10 times of interest rate inversion, the Dow Jones index has been significantly reduced without exception.

In short, the yield of government bonds is basically equal to the benchmark interest rate. Logically, short-term Treasury yields are higher than long-term Treasury bonds, or short-term high interest rates have curbed economic growth, or the potential for long-term economic growth is difficult to support short-term high interest rates. From another perspective, long-term interest rate declines mean that investors are more pessimistic about long-term economic growth, while short-term interest rates are higher, which will have a negative impact on the current economy.

No need to worry too much

For the 3 year period that just appeared The 5-year US Treasury yields are upside down, and mainstream Wall Street institutions believe that investors do not need to worry too much. Peng Bo quoted some fund managers' opinions as saying that the three-year and five-year US bond yields will not affect the performance of various assets in the short term; the 2-year and 10-year US bond yields will be upside down. More attention to the market, the impact on the market is even greater.

But for the US banking industry, they are very worried about the downside of US bond yields. Some banks said that the rate of return of stocks means that the economic outlook is uncertain, the quality of existing loan portfolios will decline, the risk tolerance of banks will decline, and the profits from loans will be reduced, and the bank's loan business will be unprofitable. . Once the credit crunch in the banking industry means that the long-term financing of enterprises will encounter difficulties. This will directly affect the real economy and further limit economic growth.

Shen Wan Hongyuan Securities believes that the long-term interest rate of US long-term government bonds is upside down, usually accompanied by the change of monetary policy and economic cycle, and judges the more significant economy of the United States through the 3-5 year term spread of US debt. The recession is too early, but as the Fed raises interest rates into the later stage, the gradual slowdown in US economic growth in the medium term will be a high probability event.