US Interest Rate Hike Is Expected To Heat Up. European Economy Is Pressing Us.

Recently, the peripheral A shares have fallen alone, the European and American economies have been improving, the stock market has gone up and up, and the hedging assets such as gold dollar bonds have fallen.

On the contrary, the main contradiction in the current market is not the fundamentals but the policy side.

Since April, the upgrading of financial leverage has triggered liquidity tension, risk appetite decline and demand contraction.

It is expected that the financial deregulation will soon disappear. The three big signals of future regulatory policies and monetary policy easing are: the two signs of the bottom of the economy are clear, the financial leverage will be more complete, and the demand for economic and political stability will rise.

US interest rate hike is expected to rise in June.

Last week, the US Federal Reserve adopted the 9:0 vote in May to maintain the benchmark interest rate unchanged. We believe that since March, despite the slowdown in economic activity, the labour market has further improved. The fundamentals of supporting consumption are still solid; longer-term inflation expectations remain unchanged.

Whether the Federal Reserve will continue to raise interest rates ultimately depends on the fundamentals of the economy. The current futures market data show that the rate of increase in June rose to 78.5%.

In April, US non-agricultural employment improved.

In April, the number of new non farm workers in the United States increased by 211 thousand, exceeding the expected 190 thousand.

In April, the unemployment rate in the United States was 4.4%, exceeding the expected 4.6%, and at the same time, it reached a new low of ten years.

In April, the resumption of non farm employment basically confirmed the possibility of raising interest rates in June.

At present, the market is still divided on the timing of the third increase in interest rates during the year.

Oil prices are leading commodities.

Crude oil, basic metals, precious metals, black commodities and other commodities fell last week.

By the end of last Friday, the number of active oil drilling rigs in the United States increased by 6 units, to a total of 703 units, once again refreshing the new high in the past two years, and has been rising for 16 weeks.

WTI oil prices fell below $44 a barrel last week, the lowest level in 16 years since November.

GDP continued to grow in the first quarter of the euro area.

Last week, the statistics released by the European Union Statistics Bureau showed that the euro area GDP reached an initial value of 1.7% in the first quarter of the year, which was 0.5% above the initial value.

The GDP growth rate in the euro area has increased for 3 consecutive quarters, compared with the 3 quarter decline in the US GDP growth rate.

Last week

Continue to decline, the average interest rate of treasury bonds 15bp, AAA class corporate bonds, city investment bonds yields on average 11BP, AA class corporate bond interest rates average uplink 10bp, convertible bonds fell 0.3%.

The central bank's tightening attitude has not changed.

Last week, money market interest rates declined slightly, and R007 declined from 3.99% to 3.66%. However, the financial crisis eased slightly, and the central bank began to restart the large-scale withdrawal. This shows that the central bank's tightening attitude has not changed.

In March this year, the central bank's total assets dropped by about 600 billion over the end of last year, indicating that the central bank has begun to shrink. Under the background of financial leverage, the central bank will maintain a tight monetary policy stance.

Large capital management scale contraction.

From the early CBRC issued a document on the bank's assets and liabilities business supervision, until last week, the securities and Futures Commission of the securities business management collection plan to regulate, the regulation is deepening.

Under the supervision of one line and three companies, the scale of trust products decreased by 57% in April, and the scale of the subsequent brokerage firms will shrink.

In addition, the number of financial issues decreased by 15% in April, and the expansion of banks' outward balance slowed down.

The bond market will continue to adjust to the real stage.

Short term increase of 10 years treasury bond interest rate range 3.3-3.7%.

The value of city investment tends to drop.

We have stressed since the end of last year that the government's determination to regulate local governments' financing behavior should not be underestimated. The cutting of the financing platform and the credit of local governments is an inevitable trend. Once the city investment bonds are defaulted, the whole city investment bonds will face revaluation.

Although the city investment and financing channels are still smooth, debt replacement is still advancing, short-term city investment credit risk is limited, but the future uncertainty is bigger. At present, the valuation of city investment bonds is still supported by belief, and the investment value is decreasing.

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