US Treasuries focus on oil price levels and AI deflation trades; post-war reconstruction in Iran boosts midstream intermediates; April EPMI exceeds seasonal demand improvement, driving price increases --- 0421 Macro Distilled

US Treasuries focus on oil price levels and AI deflation trades; post-war reconstruction in Iran boosts midstream intermediates; April EPMI exceeds seasonal demand improvement, driving price increases --- 0421 Macro Distilled

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  1. In the current US-Iran conflict, US Treasury pricing remains relatively mild. The market has already priced in short-term inflation rise, but long-term inflation expectations remain stable. If geopolitical tensions ease, US Treasury pricing should focus on two core variables: in the short term, the central oil price; in the long term, AI deflation trading. Caution is needed on the lasting effects of potential supply disruptions.
  2. Post-war reconstruction in Iran may follow the path of “trade first, investment follows, resource cooperation lags.” If tensions ease, China and Iran are expected to advance cooperation in goods trade, infrastructure investment, and energy resources. Reconstruction will support demand for midstream intermediate products like steel and cement.
  3. The April Strategic Emerging Industries Purchasing Managers Index (EPMI) fell slightly by 0.2 percentage points to 57.4, but showed performance above seasonality. Next-generation information technology and new energy both stayed above 60 in high prosperity range. Marginal improvement on the demand side outpaced the supply side, with purchasing prices remaining high and selling prices rising.

I. US Treasury Focuses on Oil Price Center and AI Deflation Trading

US Treasury Focuses on Oil Price Center and AI Deflation Trading (Shenwan)

Shenwan points out that in the current US-Iran conflict, US Treasury pricing is relatively mild. The market has priced in a short-term rise in inflation, but long-term inflation expectations remain stable. If geopolitical tensions ease, US Treasury pricing should focus on two core variables: in the short term, the central oil price; in the long term, AI deflation trading. Meanwhile, caution is needed about the lasting effects of potential supply disruptions.

  1. During oil price shocks, interest rates go through “first trade inflation, then trade growth” in two stages; the final direction depends on the macro environment.
    • Stage one: interest rate pricing logic is supply contraction and oil price jump.
    • Stage two: high oil prices squeeze demand, actual purchasing power of residents falls, growth expectations weaken, long-term interest rates peak and then fall or oscillate.
  2. For US Treasury, short-term inflation is already priced in, long-term risks remain restrained.
    • This shock led to relatively mild US Treasury pricing, with a maximum rate rise of only about 50bp; rate changes can be compared to the Gulf War case, rather than the two oil crises.
  3. When geopolitical tensions ease, US Treasury pricing has two core variables: in the short term, focus on the central oil price, as it is the key to Fed policy this year; in the long term, focus on AI deflation trade.
    • The actual impact of supply disruptions can persist for years, prompting increased demand for safety redundancy. Low-cost transport chains may be replaced by higher-cost and safer chains.
    • If allies question the credibility of US security commitments, even with eased tensions, US Treasury rates may not smoothly return to pre-war lows.

Currently, US Treasury has already priced in the short-term inflation rise, while long-term inflation expectations remain stable.

II. Iran's Post-War Reconstruction Boosts Midstream Intermediates

Iran's Post-War Reconstruction Boosts Midstream Intermediates (Eastmoney)

Eastmoney points out that Iran’s post-war reconstruction may follow the path of “trade first, investment follows, resource cooperation lags.” If tensions ease, China-Iran cooperation in goods trade, infrastructure investment, and energy resources could advance. Reconstruction will support demand for midstream intermediate products like steel and cement.

  1. Iran has a stable, independent government foundation; post-war reconstruction may follow the path “trade first, investment follows, resource cooperation lags.”
    • If tensions ease, China-Iran cooperation in goods trade, infrastructure investment, energy resources is expected to advance.
    • If sanctions continue and Iran’s relations with Gulf countries worsen, China may substitute trade with UAE.
  2. Related exporters, infrastructure and overseas enterprises, resource-based companies will benefit in turn.
    • In terms of equity, China’s imports and exports with Iran, project investment, and cooperative agreements are expected to increase, favoring the logic from manufacturing to infrastructure and then to resource extraction.
    • In commodities, reconstruction increases actual work volume and supports steel, glass, cement, chemical materials and other midstream intermediate products.
    • If geopolitical risk eases and stagflation expectations weaken, liquidity may loosen, and prices of industrial intermediates and upstream industrial metals could rebound.

In terms of exchange rates, export expectations strengthen, and Iran’s dependence on the US dollar settlement system may decrease, supporting RMB appreciation.

III. April EPMI Outperforms Seasonality, Demand Improves, Prices Rise

April EPMI Outperforms Seasonality, Demand Improves, Prices Rise (Guangfa)

Guangfa points out that the April Strategic Emerging Industries Purchasing Managers Index (EPMI) fell slightly by 0.2 percentage points to 57.4, but showed performance above seasonality. Next-generation information technology and new energy both stayed in high prosperity range above 60. Marginal improvement on the demand side outpaced the supply side, with purchasing prices holding high and sales prices rising.

  1. The April EPMI fell slightly by 0.2 points to 57.4, outperforming seasonality.
    • March and April are both peak work seasons, but April is generally less prosperous than March.
  2. Next-generation information technology and new energy are both above 60 in high prosperity range.
    • Next-generation information technology is riding the wave of the AI revolution, while new energy is at the forefront of new energy system construction, also benefiting from increased external demand due to rising oil prices.
    • Energy conservation & environmental protection and bio-industry are in the 55-60 prosperity range.
    • High-end equipment, new materials, new energy vehicles are in the 50-55 range.
  3. Demand indicators show larger marginal changes than supply; new industry supply-demand structure is optimized.
    • On the supply side, production rose slightly by 0.2 points month-on-month; purchasing was flat month-on-month, maintaining strong production intensity.
    • On the demand side, product orders and export orders rose MoM by 0.9 and 4.8 points respectively; external demand increased more than internal demand.
    • The price cycle continues to improve; purchasing prices held high, sales prices continue to rise.

This year, Spring Festival was in mid-February. March was still affected by gradual resumption of work after Lantern Festival, while April is a full resumption stage.

Risk Warning and DisclaimerThe market has risks, investment should be cautious. This article does not constitute personal investment advice, nor does it take into account individual users’ particular investment objectives, financial situations, or needs. Users should consider whether any opinion, viewpoint or conclusion herein fits their specific situation. Investment based on this is at your own risk. ```