SignalPlus Macro Analysis (20240314): Inflation rebounds, the Federal Reserve will still maintain an accommodative policy

Yesterday, the market showed little change, remaining cautious near recent highs. After the CPI announcement, ripples were felt, and with the issuance of an additional $22 billion in 30-year Treasury bonds, U.S. bond yields initially exhibited a bear steepening trend. Additionally, early signs of a reflation trade emerged, with copper prices breaking a two-year downtrend, and U.S. inflation swaps also rebounding to a three-month high. Despite persistent high inflation, the Federal Reserve may continue to maintain an accommodative policy, and the short-term focus may shift back to long-term yields, especially as the market remains uncertain about how it will react to the Bank of Japan's potential cancellation of yield curve control next week.

Japanese labor unions have achieved record wage increases, and the Bank of Japan seems poised to finally exit its negative interest rate policy. With the Shanghai Composite Index also showing gains this year (+3%), the 30-year Chinese government bonds have experienced their largest decline since 2021 (prices falling, yields rising). Will China's recent deflationary pressures also ease? As central banks around the world maintain their accommodative stances, will we witness a synchronized wave of reflation globally?

Nothing changes market sentiment more than price. Microstrategy has announced its second convertible bond issuance this month, aiming to raise $500 million to purchase more Bitcoin. The company has already acquired over $1 billion in Bitcoin in the first quarter of this year, primarily benefiting from the sale of early convertible bonds, with net proceeds exceeding $800 million. The company's stock price has surpassed its 2021 highs, now about halfway to the peak during the 1999 internet bubble. As the cryptocurrency rally continues, will history repeat itself?