The Central Economic Work Conference Clearly And Steadily Grows The issuance of local government bonds during the year is nearing completion

Highlights from this issue

² News Reviews

Ø The Central Economic Work Conference clarified the tendency to stabilize growth and resolutely curbed the new hidden debt of local governments

From December 8 to 10, the Central Economic Work Conference was held in Beijing, summarizing the economic work in 2021, analyzing the current economic situation and deploying the key points of economic work in 2022. The meeting demanded that next year's economic work should be steady and steady; it is necessary to ensure the intensity of fiscal expenditure and accelerate the progress of expenditure; implement a new tax reduction and fee reduction policy, strengthen support for small and medium-sized enterprises, individual industrial and commercial households, manufacturing, risk mitigation, etc.; moderately advance infrastructure investment; resolutely curb new hidden debts of local governments; at the same time, we must adhere to the best efforts, do what we can, improve the public service policy system system, and in education, medical care, pension, Housing and other areas of greatest concern to the people provide basic public services accurately.

Dynamic comments: This meeting pointed out that China's economy is facing the triple pressure of demand contraction, supply shock and expectation weakening, and the external environment under the impact of the epidemic is more complex and uncertain, and the meeting further clarified the tendency of macro policy to stabilize growth. In terms of fiscal policy, the meeting proposed that "it is necessary to ensure the intensity of fiscal expenditure and accelerate the progress of expenditure" and "moderately advance infrastructure investment". Next year's fiscal policy will be more active and promising, and local debt is more likely to be put forward. According to media reports, the amount of special bonds approved in advance has been issued, and the pace of local bond issuance next year may be put forward to ensure that the economic operation at the beginning of next year is in a reasonable range. At the same time, as an important subject of local infrastructure construction, urban investment enterprises may bring benefits to some urban investment enterprises by appropriately advancing infrastructure investment policies. For hidden debt, compared with the expression of the 2020 Central Economic Work Conference on "grasping and resolving the hidden debt risks of local governments", the expression in 2021 will be adjusted to "resolutely curb the new hidden debt of local governments", and the supervision of financing platforms will continue to be strict next year. Under a series of strict regulatory measures, the growth rate of hidden debt is expected to slow down in 2021, and in 2022, while stabilizing growth, it will continue to adhere to high-quality development, risk prevention and deleveraging will not be reduced, and the financing policy for urban investment is expected to continue to be tight. In addition, 2022 is the final year of the three-year action plan for the reform of state-owned enterprises, and the reform of state-owned assets and state-owned enterprises will promote state-owned enterprises to obtain incremental income to improve quality and efficiency, so as to resolve the hidden debts of state-owned enterprises or will increase. In addition, the meeting stressed that "we must adhere to the best efforts, do what we can, improve the public service policy system, and accurately provide basic public services in education, medical care, pensions, housing and other areas that the people are most concerned about." Promoting the construction of affordable housing is an important task of housing construction during the "14th Five-Year Plan" period, and it is also an important point of strength to stabilize domestic demand, based on the policy orientation of the Central Economic Work Conference, next year's new special debt funds or continue to tilt to the field of public service construction such as affordable housing projects.

Ø Hunan issued the country's first "carbon neutral" local government special bond

Ø This week, 2 urban investment companies issued an announcement on the early redemption of principal and interest of bonds

Ø A total of 7 urban investment bonds were postponed or cancelled this week

² Issuance of local government bonds and urban investment bonds

Ø Local government bonds: This week, a total of 25 local bonds were issued across the country, the scale of issuance fell by 208.192 billion yuan to 57.546 billion yuan from the previous value, and the net financing amount fell by 200.499 billion yuan to 49.206 billion yuan. As of December 12, the total scale of local bonds during the existence period was 30.04 trillion yuan. From the perspective of issuance structure, a total of 21 new bonds were issued this week, with a total scale of 47.255 billion yuan, of which 1 new general bond was added with a scale of 1.404 billion yuan, and 20 new special bonds with a total scale of 45.851 billion yuan; a total of 4 refinancing bonds with a total scale of 10.291 billion yuan, of which 2 bonds were used to repay the principal of local government bonds due. The issuance period of local bonds is mainly 20 years, and the weighted average issuance period is 14.70 years. From the perspective of regional distribution, a total of 3 regions issued local bonds, of which Hubei issued the largest scale, reaching 44.470 billion yuan. From the perspective of issuance costs, the interest rate of general bond issuance rose by 1.40BP to 3.01%, the interest rate of special bond issuance fell by 4.06BP to 3.31%, and the interest rate of Hubei issued the highest, reaching 3.34%; the spread of general bond issuance widened by 4.74BP to 26.82BP, the interest rate spread of special bond issuance widened by 1.45BP to 23.05BP, and the interest rate spread of Qinghai issuance was the highest, reaching 28.19BP.

Ø Urban investment bonds: A total of 144 urban investment bonds were issued this week, the issuance scale increased by 35.93% over the previous value to 110.648 billion yuan, and the net financing amount increased by 940 million yuan to 25.07 billion yuan compared with the previous value; of which the infrastructure investment and financing enterprises issued a total of 139 bonds, with a total issuance scale of 104.550 billion yuan. As of December 12, the total scale of urban investment bonds during the existence period was 11.62 trillion yuan, of which the stock of bonds in the infrastructure investment and financing industry reached 11.13 trillion yuan. The interest rate and interest rate differential of 1-year and 3-year AAA-level urban investment bonds generally declined, and the interest rate and interest spread of 3-year AAA-level urban investment bonds fell the most. The issuance structure is dominated by private debt, accounting for 25%. The issuance period is mainly 1 year and below, accounting for 33%. The issuer entity level is mainly AA+, accounting for 36.11%. From the perspective of regional distribution, a total of 23 provinces issued urban investment bonds this week, of which Jiangsu Province still issued the largest number of urban investment bonds, reaching 28; Heilongjiang Province issued the highest interest rate, 6.50%, and the largest issuance spread, 423.41BP.

² Transactions between local government bonds and urban investment bonds

Ø According to the announcement information, no urban investment enterprises have undergone subject level adjustment this week.

Ø According to public information, no credit risk event occurred in urban investment enterprises this week.

Ø Local bonds: This week, the trading scale of local government bond spot bonds totaled 161.864 billion yuan, a decrease of 85.438 billion yuan from the previous value; the yield to maturity of local bonds fell as a whole, with an average downward range of about 1.90BP.

Ø Urban investment bonds: This week, the trading scale of urban investment bonds cash bonds was 279.773 billion yuan, an increase of 18.027 billion yuan over the previous value; the overall yield of urban investment bonds was down, with an average downward range of 2.50 BP; in terms of credit spreads, the 1-year and 3-year spreads were narrowed, narrowing by 0.04BP and 0.03BP respectively.

Ø Abnormal transactions of urban investment bonds: Under the broad caliber, a total of 144 abnormal transactions occurred in 103 bonds of 70 urban investment entities this week, and the number of entities, the number of bonds, and the number of abnormal transactions decreased compared with the previous value.

This article originated from the financial world