By Tang Zhao, Research Institute of Finance, DRC

Research Report, No.98, 2021 (Total 6163) 2021-4-26

Abstract: From mid-February to the end of March 2021, the US 10-year treasury bond yield had swiftly increased. Affected by this, global stock market suffered from a downward pressure and notable fluctuations in response. Long-term treasury bond yield reflects the outlook of economic growth and inflation expectations. The massive bailout policy measures adopted by US government enhanced potential demand and boosted economic recovery, whereas they increased pressure on future price inflation. These policy measures have led to the upswing of treasury bond yield. The easing of COVID-19 epidemic and the strong fiscal expenditure willingness of Biden Administration are both conducive to accelerating US economic recovery, indicating that there still exists room for further uprising yield of treasury bond. The fast rising of US treasury bond yield will exert an impact on high-value US stock prices and will in turn increase the financing costs. The Federal Reserve is now taking a wait-and-see attitude and intends to guide the easy money policy to exit market expectations. While the massive bailout policy measures revealing less vitality, the global liquidity will become tightened and increasing pressure on capital outflow from emerging-market and exchange rate depreciation will grow and these factors will give rise to the upsurging financial risks. We need to make efforts in preventing imported financial risks, safeguard overseas assets and promote the internationalization of RMB in a steady and orderly manner.

Keywords: US treasury bond yield, financial risks, global liquidity