The fiscal stimulus policy was passed, and mainstream currencies rose accordingly. Do you know the story behind it?
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Although the stimulus bill was passed by the House of Representatives last week, because the Senate has made some amendments to the bill, after the Senate passes it, the bill will be sent back to the House of Representatives for re-passing, and then signed by Biden.
Compared with the content of the previous bill passed by the House of Representatives, the content passed by the Senate this time reduced the amount of assistance from $400 to $300 per week, but the date was extended from August 29 to September 6. Tax-free allowances. The bill includes relief checks of $1,400 per person (subject to individual or family annual income criteria), child benefits of up to $3,600 a year, $350 billion in state aid subsidies, $34 billion in subsidies for the Affordable Care Act and $14 billion in new crown vaccine subsidies.
The cryptocurrency market, which is open for trading 24/7, reacted to the news and generally rebounded sharply at the end of this week. It is worth noting that although the three major U.S. stock indexes closed up in the last trading day, the 10-year U.S. bond yield also rose simultaneously, and broke through 1.5% for two consecutive days, and is sprinting to 1.6%.
Market tug-of-war
The 10-year U.S. bond yield has risen rapidly in recent weeks, which has impacted risky assets. Powell's speech last week did not show the Fed's intervention attitude, so the market fell into volatility.
The market is still unable to clarify the impact of the 1.9 trillion economic stimulus plan on inflation and interest rates. The implementation of the economic stimulus plan is undoubtedly good for risk assets such as cryptocurrencies and U.S. stocks, but the 10-year U.S. bond yield continues to rise, which will depress risk assets.
Today, CITIC Securities released a research report saying that the 10-year U.S. bond yield has broken through the key point of 1.5% for two consecutive days. This is an important reason for the rapid rise in yields in recent days. Therefore, it is expected that the yield of 10-year U.S. bonds still has 20-30bp upside in this round, and there is still about 10% room for adjustment in U.S. stocks.
The current U.S. debt is cold or under selling pressure. In February, the U.S. 7-year treasury bond auction hit a record low, which directly pushed up interest rates, while on February 26, the price of 5-year treasury bonds fell sharply. The U.S. Treasury Department auctioned $38 billion in 10-year bonds and $24 billion in 30-year bonds on Wednesday and Thursday.
However, Jim Reid, chief credit strategist at Deutsche Bank, said on Wednesday that the market should focus on real interest rates. If real interest rates rise further, global risk assets will contract.
The relationship between real interest rate and nominal interest rate can be understood as nominal interest rate (U.S. bond yield/risk-free interest rate) = nominal interest rate + real interest rate.
