Monetary Policy Will Not Grow Again And Will Depend Mainly On Fiscal Policy.

Up to now, this year's bond market changes in April as the dividing line, before the monetary and financial situation in the "wide money + wide credit" combination mode, and then stepped into the "wide money + tight credit" mode, before the bond market shock repeated, then in mid April as a discount point, interest rate showed a continuous decline trend.

And in reality, we also see that the 1 - year financial bonds have fallen below 2.25%. Do you really think that only 10 - year varieties are assets, while the 1 - year varieties are not assets?

This view actually implies two meanings:

First, under the conditions of fiscal policy, economic growth may not fall.

But even with more optimistic expectations, few people believe that fiscal policy will pull the economy up.

Second, monetary policy will no longer be

It means 2.25% operations in the open market.

There will be no downlink, so the longer term interest rate is blocked.

It should be said that the prudent view of the current market is based on the above judgment.

First, the goal of broad finance is not the reason for empty bonds.

First of all, what we want to say is that whether monetary policy or fiscal policy, the definition of tightness is a goal or a tool. Whether it can be turned into actual effect is the most critical link. The only criterion for measuring effectiveness is whether social financing can start and recover.

Simply separating monetary policy from fiscal policy is an idealized state in itself. Therefore, before any social capital rises, any tool or means is zero, and the only measure of effectiveness is the broad money supply M2 or the total amount of social financing.

So just as "broad monetary policy objective is not a reason to see more", "the goal of broad fiscal policy is not a reason to see empty". The realization of more or less in the bond market ultimately depends on whether loose or tight goals can be effectively pformed into loose or tight credit derivatives.

Because interest rate is determined by financing demand and capital supply (monetary conditions), the three macro indicators represent demand and supply to some extent, that is, the change of M2 (or total social financing) represents the change of the financing demand curve. Inflation rate (CPI) affects whether the supply curve will tighten, and the speed of economic growth affects whether the supply curve can be expanded.

Two, the central bank's short-term interest rate is not the only factor affecting long-term interest rates.

Also,

Will not relax the judgment itself or not? Even if we assume that monetary policy will not relax, the 2.25% counter repo interest rate in the open market will not drop. Will a longer period of interest be blocked?

One view is that open market operation interest rate is the concept of capital cost. When this cost is no longer reduced, other assets income can not be reduced.

The essence of this view is that "the cost of liabilities determines the return of assets". In fact, it has long been proved wrong.

What is similar to this view is that "the rate of return on wealth is not reduced, and the yield of bonds can not be reduced", which has proved undesirable in the past 2014-2015 years.

In fact, on the contrary, "the rate of return on assets determines the cost of liabilities". A classic example is that the rate of return of entities affects the change of interest rates.

Here I quote a picture from the Internet, the relationship between the ROI and the cost of capital:

Under what conditions, will the interest rate of the central bank's open market operation become a constraint on the downward trend of long-term interest rates? I think there should be two premises:

1, the central bank will have an unlimited amount of "swallowing" and "vomiting" liquidity at a certain interest rate level, that is, when interest rates fall below a certain level, they will swallow the liquidity at 2.25% levels.

2, social investors are not optimistic about the long-term economic growth rate and remain optimistic about the return on assets in the future.

These two conditions are indispensable and the latter condition is crucial.

Just imagine that if social investors are expected to have a low return on assets in the future, even if the central bank can provide short-term returns, they will inevitably enter into long-term assets. As long as the return rate of this long-term asset is still higher than the level of return provided by the central bank, this will lead to a constant yield curve and even exclude the reverse interest rate curve.

In fact, there was a 1-3 year reverse interest rate curve in the fourth quarter of 2008.

On the whole, not to mention that the steep rate of the current interest rate curve is still small. (historically, in the case of short term interest rates, the best 10 year interest rate can only be 7 days higher than the 50-60 interest rate). Even in the case of small spreads, long-term interest rates are definitely not dominated by a single short-term interest rate. The other dominant factor is the expectation of social investors for long-term returns in the future. If pessimism is expected, the curve can be constantly compressed or even reversed.

The central bank's short-term interest rate dominance is the key to long-term interest rates, but it is not the only one. After all, the history of the bond market is much longer than that of the central bank.