With the surge in commodities after the National Day, more and more people in the market have begun to agree with the logic of the coming of big inflation, and have begun to be strongly bullish on agricultural products(Quotes000061,Buy), to seemingly all varieties of industrial products, howevertrendsstartoften start Beginning with disagreements and ending with consensus, yesterday’s price collapse of government bond futures has been transmitted to the entire commodity market. There seems to be signs of a market change. Why can seemingly unrelated price fluctuations have such a big impact? Is the future really the turning point for the end of this commodity rally? This also starts with the transmission mechanism from the monetary system to commodity prices that we have already mentioned before.
(Jiangxi New Materials Co., Ltd.)
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1. Interest rates–How inflation logic affects commodities
We will make a simple analysis of the interest rate-inflation logic that has begun to emerge today. Other logics will slowly ferment and be confirmed over time. Interest rates and inflation have always been a pair of contradictory and mutually reinforcing factors. Whenever inflation begins to rise, raising interest rates is the most preferred method of the central bank. Now our central bank faces a dilemma in monetary policy: interest rates cannot be too high in order to stabilize an economy that is still under downward pressure; interest rates cannot be too low in order to stabilize the RMB exchange rate and prevent and control potential inflation. Therefore, we are currently implementing a neutral monetary policy; however, when the RMB exchange rate is impacted by the rapid rise of the US dollar, the balance will tilt towards high interest rates.
When interest rates begin to rise, first of all, it will suppress inflation expectations; secondly, it will have a gradually increasing impact on the capital costs of this capital-driven market. Finally, there will also be some pressure on the suppression of industrial chain procurement and replenishment demand. As a result, commodity prices tend to fall.
Finally, Treasury bond futures fell because they more reflected the rise in interest rates, so they seemed to play a leading role in the decline. In fact, the fundamental logic lies in the interest rate analysis above.
Chart: Yesterday’s sharp drop in the price of Treasury bond futures was just an increase in interest rates.The second wave of reaction to the rise, the real gap and plunge started from the starting point of the sharp rise in interest rates on 11.9 as we mentioned earlier.
2. Has the trend turning point of interest rates appeared?
We agree that inflation tends to rise, especially the rise in agricultural products. However, it should be noted that as inflation continues to rise, when the market has begun to realize the opportunity, our regulators have already Realizing that we need to prevent and control the risk of inflation, we see that the liquidity of the inter-bank market no longer has the neutral sideways and stable trend of the past, but has entered a step-by-step upward trend (of course, if you use the year-end It is also possible to explain it by the logic of capital shortage, but at least the periodic rise in interest rates is already a mid-term trend and should be paid close attention to after the year). The rise in the exchange rate of the US dollar against the RMB (depreciation of the RMB) is also another important driving force for the central bank. The number of new RMB loans in the chart below also shows signs of further decline after the credit release peak.
The rise in interest rates is affected by the superposition of inflation and the exchange rate of the US dollar against the RMB. Therefore, judging whether the change in interest rates will continue and the pace of change must start from these two factors. There is no need to go into details about the observation and expectations of inflation data. The changing trend and rhythm of the US dollar against the RMB exchange rate have been clearly judged in the previous article (“Does the US dollar breaking new highs mean that the long-term trend has been determined?”)
Difficultto come outnow inone stepwideloose. Thefluidsexuallong-termturning point haspassed In this year9-10the moon risesappears,and strong> GraduallyGraduallyClearly,andIn the US dollar interest rate hikefestivalPointpromptneargraduallygraduallyaccelerate . However, due to the need tomaintain economic stability, interest ratesare bound to rise slowlyin Sexadjustmentsandmay even drop againin some periods of time.
3. How will it affect commodities?
For commodities, they are not only affected by the logic of interest rates and inflation, but also the logic of capital flows. If interest rates rise at the same time, capital still cannot flow freely and can only flow in the domestic stock market, real estate market, and bond market. , allocation within commodities, asset prices will wax and wane, and various strange phenomena may occur in the end result: interest rates rise, but asset prices continue to rise (asset prices ignore the pressure of rising capital costs); or the stock market rises, commodities fall, and bonds Market declines (risk appetite both increases and decreases). At that time, we cannot use simple qualitative logic to analyze. We must use dynamic and quantitative logic to analyze the changes in funds when multiple logics work together, in order to draw more accurate staged conclusions.
> From a chemical perspective, wethink thatmay bethis waveorder strong>The end of the periodrise, or thetrendnear the tail SoundSignalSignal (except for agricultural products and a few industrial products with fundamental shortages).
However, investors need to be reminded of two points: One is that the commodities in which funds are pouring into can be both long and short. When funds can find a reason to go long, the price rise will become more violent. When encountering strong resistance, it is also profitable for funds to short-sell. Therefore, the so-called influx of funds will definitely bring about big losses. The logic of the upward trend deserves careful consideration, and it is even more clear that the influx of funds will inevitably bring greater volatility. Second, in the long run, the long-term fundamentals of the current economy are still bottoming out, the new economy (爱记,NET,Information) has not yet appeared, so once the fundamentals of macroeconomic downturn are confirmed, the market’s expectation of being bearish on commodities will reappear.
The rise in long-term interest rates is an inflection point in the trend, but the rise will be slow, phased, and even downward in certain periods. Therefore, as long as the risingtrend of inflationdoes notdisappear, the people Currency exchangeratedepreciationexpectedperiodnot has disappeared, so will commodities still never come? GreedPulse upwards one after another, one after another, until capital can flow freely and the fundamentals of macroeconomic downturn are confirmed, it can return to the downward trend. Channels.
Thetrend of �� has notdisappeared, and the RMBcurrency exchange ratedepreciated strong>Theexpectedperiodhas notdisappeared, then what /strong>In the futureCommodities will alsogive birth topulses that come and go, wave after wave. Formallyrising will not return to the downward channel until capital can flow freely and the fundamentals of macroeconomic downturn are confirmed.
