The global bond market sounds an alarm, and the options market is heavily betting on the Federal Reserve2017Annual interest rate reduction

The deflation whirlwind sweeping the world has dragged the yield of treasury bond to new lows, falling to zero or falling below zero, even the omnipotent Federal Reserve（FED）They also had to be forced to surrender. Currently, Switzerland30Year, Japan15Year, Germany10Yields of one-year, Australian eight year, French seven year and Irish four-year treasury bond all fell into negative areas.





Along with the plummeting probability of interest rate hikes and the credibility of the Federal Reserve, investors are increasingly betting that the US money market will inevitably encounter negative interest rates. althoughoptionMarket vs. Federal Reserve2016The bet on adopting negative interest rates for the year has moderately decreased, but expectations are still high2017The bet that negative interest rates will be implemented this year has never been so high...


Renowned financial blogZerohedgeHe said that in the past few years, he may have made a speech in the officialdom of Switzerland, Japan and Germany that "similar (negative yield of treasury bond) will never happen"...But in the end, these situations still arose...At present, some analysts have predicted that the yield of US treasury bond bonds may also fall to a negative value.





[blockquote]
Investment advisory firmsHarvest Volatility ManagementPartners and senior investors in the options marketDennis DavittacceptCNBCDuring the interview, he said that the US treasury bond bonds are likely to have negative yields. "If the interest rates of Germany and other countries in the world further decline in negative areas, it is possible to see the negative interest rates of the US, which will become a digital game. Who knows where the zero line will be drawn?"


However, Commercial Bank of New YorkManhattan Venture PartnersChief Economist ofMax WolffIt is said that US bonds have actually had negative interest rates for a long time, but not yet in name. He expects nominal interest rates not to fall to negative values, as American investors have a greater risk preference than Japanese and German investors, and Americans are more inclined to buy stocks rather than bonds with low yields.[/blockquote]

The Brexit referendum is approaching, increasing the risk of a downturn in global economic growth, and the Federal Reserve6The "pigeon sound" of the monthly interest rate meeting reappeared, and while holding steady as scheduled, it also specifically pointed out that the pace of improvement in the labor market has slowed down. Even Kansas City Fed Chairman George, who strongly advocated for interest rate hikes in the first two occasions, has changed his course this time...The subsequent Yellen press conference did not boost hawkish expectations either...Foreign exchange gold


Currently, the probability of the Federal Reserve raising interest rates within the year is further plummeting,12The probability of raising interest rates at the monthly meeting is less than20%：



It seems that in the global bond market, only treasury bond bond yields are relatively "cheap" (and "safe"):



The following image shows,2016Year and2017The cumulative holdings of outstanding European dollar options that mature annually have been increasing, and these options are closely related to short-term interest rates. If the Federal Reserve implements negative interest rates, holders of such contracts will make money:



The Nikkei Shimbun did not disclose the source of the news. The central banks of Japan, the United States, and Europe are discussing measures to provide emergency US dollar liquidity to financial markets in the event that the UK votes out of the EU, leading to a sharp drop in the pound.
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