The constant pacing between domestic commodity prices and bond yields affecting inflation expectations in 2017 suggests that, in addition to the shock of financial regulation policies in the first half of the year, bond yields largely reflect expectations of economic growth, inflation and monetary policy. Large commodity prices have been falling steadily since september, with the south china industrial price index falling by 11. 92 per cent since september, and the south china consolidated index falling by 9. 84 per cent, with some species such as “intergenerational double-focus” falling by almost 30 per cent. Whether the decline in commodity prices is due to weak demand or increased stocks, it will mean a fall in inflation expectations and, in terms of data, macroeconomics have maintained “inflation-free and deflation-free” moderate price levels, but in this context the bond rate of return has not continued a downward pattern similar to that of june, but rather maintained the upward trend while commodity prices fell: the 10-year rate of return on national debt rose from 3. 6353 per cent at the beginning of september to 3. 6540 per cent, and on national debt from 3. 6181 per cent to 3. 6462 per cent over the five-year period. In late september alone, there was a multiplicity of actions based on the short-term trade-offs of monetary policy by central banks, which quickly collapsed after the central bank’s policy of “long-term targeting” was set. The deviation between the fall in commodity prices since september and the upturn in bond yields was also observed in may 2017, but gradually bridged between the beginning of june。
Non-synchronous adjustments between commodity prices and bond yields in september were the same as in may, when both showed distortions in the bond yield curve. After a period of steep recovery and a brief reversal in september, the yield curve for bonds was also distorted since september, when the yield curve for bonds went upwards for 10 years and 1 year, while the yield rate for seven-year bonds with slightly lower liquidity levels declined, the only difference from may was that the yield curve for bonds in september evolved from a upside to a single-camel structure. However, the reasons for the distortion of the two yield curves vary: financial regulation policy in may was driven by tight expectations of warming as the main cause of the “twin-camel peak”; september was marked by the persistence of liquidity concerns that could not be alleviated by “future-targeting” structural liquidity contradictions。
The process of bridging the non-synchronous adjustment between commodity prices and bond yields since september is different from that of may: the deviation between large commodity prices and bond yields in may ended in a combination of pro-resort stock cycle phase-downs, as shown by monthly high-frequency data, a synchronous downward spiral of price indices such as ppi, central bank monetary policy that did not “follow” the fed's interest rate hikes, and shock-bust slowdowns that ended in bond yields, and precisely because of the fall in bonds, which led to the market's “interest rate or peak” convergence expectations. The distortion of the bond yield curve structure since september is not an exogenous shock, such as policy factors, but rather a structural contradiction of liquidity embedded in the bond market, so that, in the case of a liquidity layer, where central banks act to curb leverage by increasing the cost of financial availability in the context of macroeconomic liquidity aggregates, a liquidity hierarchy mechanism between central banks and commercial banks, and between commercial and non-bank financial institutions, characterized by a shortage of basic currencies, cannot be substantially alleviated, and at the end of september, the trading pattern under bond yields may be short-lived. In the context of the central bank's clarification of the “directional reduction” that began in the first quarter of 2018, the possibility of a new easing of monetary policy by the central bank in the fourth quarter will become more pronounced, and the structural liquidity tension will become more pronounced. For financial institutions that are betting at the end of september on monetary policy easing and thus prolonging, the deepening of the structural tension in liquidity will lead to a significant rise in the finance cost hub, which will lead to scalding pressure or a higher rate of return on long-term bonds, thus repairing the bond yield curve after the “distorting flattening” of september, with the counterpart being the recovery of commodity prices from the fallout phase of september, which will be in the opposite way: in october, the bond rate of return was “a pole” and commodity prices were on the rise。
