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In the week from April 11 to April 15, the average daily index of China Financial Conditions of the First Institute of Finance and Economics was -1.17, down 0.18 from the previous week, and the index rose by 0.03 during the year.
Last week's easing of funds was the main factor driving the index down. Among the major money market rates, R001 fell to a low of 1.40%, and R007 and DR007 fell to 1.87% and 1.73%, respectively, all below the center of the policy rate.
Last week, the bond market issued a net repayment, and the financing heat was not high. Among them, the net repayment of treasury bonds was 160.09 billion yuan, and the net repayment of financial bonds and interbank certificates of deposit was 84.04 billion yuan and 28.16 billion yuan respectively.
On April 15, Chinese Min min bank issued an announcement that it decided to reduce the reserve requirement ratio of financial institutions by 0.25 percentage points on April 25, 2022, releasing a signal of steady growth. After this reduction, the weighted average deposit reserve ratio of financial institutions is 8.1%, and the RRR reduction has released a total of about 530 billion yuan of long-term funds.
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I. Overview of China's Financial Conditions Index
In the week from April 11 to April 15, the average daily index of China Financial Conditions of the First Institute of Finance and Economics was -1.17, down 0.18 from the previous week, and the index rose by 0.03 during the year.
Judging from the contribution of various indicators to the index change, the loose capital level and the narrowing of credit spreads in the bond market last week were the main factors leading to the decline of the index. The contribution of liquidity to the downward trend of the index was 27.65%, the contribution of the bond market to the downward trend of the index was 70.48%, and the contribution of the stock market to the downward trend of the index was 1.87%.
Judging from historical data, since the new crown epidemic, the financial conditions index has been in a narrow range of shocks, which is consistent with the central bank's policy statement of "not engaging in flood irrigation" and "stabilizing the word".
2. The money market
Last week, the liquidity of the interbank money market relaxed compared with the previous peripheral, which was reflected in the upward trend of interbank pledge reverse repurchase transaction volume during the week, while the interest rates of major money markets, including R001, R007 and DR007, all showed a downward trend. From a weekly perspective, R001 fell from 1.89% to 1.40%, R007 from 2.01% to 1.87%, and DR007 from 1.91% to 1.73%.
On April 15, Chinese Min min bank issued an announcement, deciding to reduce the reserve requirement ratio of financial institutions by 0.25 percentage points on April 25, 2022 (excluding financial institutions that have implemented a 5% deposit reserve ratio), and to reduce the reserve requirement ratio by an additional 0.25 percentage points on the basis of reducing the reserve requirement ratio by 0.25 percentage points for urban commercial banks that do not operate across provinces and rural commercial banks with a deposit reserve ratio higher than 5%. After this reduction, the weighted average reserve requirement ratio of financial institutions is 8.1%, releasing a total of about 530 billion yuan of long-term funds.
1. The central bank operates in the open market
Last week, the central bank's daily reverse repurchase scale was 10 billion yuan, 20 billion yuan, 10 billion yuan, 10 billion yuan and 10 billion yuan respectively, and the interest rate remained at 2.1%. Last week, the central bank's reverse repurchase maturity was 40 billion yuan, with a net investment of 20 billion yuan.
On April 15, the central bank renewed the 1-year MLF of 150 billion yuan in equal amounts, and the interest rate remained at 2.85%.
From the perspective of the balance of open market operations, the balance of reverse repurchase rose from 80 billion yuan on April 8 to 100 billion yuan on April 15, and the balance of medium-term lending facility (MLF) remained unchanged at 4.95 trillion yuan. As of April 15, the sum of the two was 5.05 trillion yuan.
2. Money market turnover and interest rates
Last week, the volume of pledge reverse repurchase in the interbank market picked up, and the volume of transactions rose from 4.45 trillion yuan to 5.43 trillion yuan during the week. Among them, the average daily trading volume of the overnight reverse repurchase (R001) was 4.4 trillion yuan, the average interest rate of R001 was 1.67%, and the R001 further fell to a low of 1.4% on April 15. Compared with the previous week, the volume of interbank money market trading showed an upward trend, while interest rates fell, indicating a marginal relaxation of the capital side.
Among other major money market rates, R007 fell by an average of 13.84bp to 1.97% last week and dr007 averaged 10.14bp to 1.88%, both significantly below the 2.1% policy rate hub.
3. Bond market
1. Bond market issuance
Last week, although the overall issuance volume of the bond market was not low, due to the high total repayment, the bond market paid back 299.455 billion yuan last week, and the overall financing heat of the market was not high.
Specifically, last week's government bond issuance totaled 147.658 billion yuan, up 94.37 billion yuan from the previous week; net financing was -158.267 billion yuan, down 132.061 billion yuan from the previous week. Among them, the net financing of national bonds was -160.09 billion yuan, and the net financing of local government bonds was 1.823 billion yuan.
Bond issuance in the financial sector totaled $778.3 billion last week, up $518.84 billion from the previous week, and net financing was -$112.2 billion, up $50.4 billion from the previous week. Among them, the net financing of financial debt was -84.04 billion yuan, and the net financing of interbank certificates of deposit was -28.16 billion yuan.
Bond issuance in the non-financial corporate sector totaled $247.969 billion last week, up $161.995 billion from the previous week, and net financing was -$28.988 billion, up $19.548 billion from the previous week. Among them, the net financing of corporate bonds was -21.351 billion yuan, corporate bonds were -34.013 billion yuan, medium-term notes were 18.029 billion yuan, short-term financing was 20.512 billion yuan, directional instruments were -3.716 billion yuan, and asset-backed securities were -8.449 billion yuan.
From the perspective of the year-on-year growth rate of various types of bonds, as of April 15, the balance of local government bonds and short-term financing in the year had the highest year-on-year growth rate, 22.3% and 28.1% respectively. Over the past four weeks, the year-on-year growth rate of interbank certificate of deposit balances has slowed, from 22.1% to 16.5%, and the growth rate of medium-term notes balances has increased year-on-year, from 9.4% to 10.1%.
2. Bond yield trend
1) Interest rate bonds
Last week, yields on Treasury bonds of various maturities fluctuated. As of April 15, the yields of January, June and 1-year Treasury bonds fell by 9.46bp, 7.58bp and 7.51bp respectively from the previous week; the medium and long-term yields fluctuated more steadily, the yields of 5-year Treasury bonds fell by 0.14bp from the previous week, and the yields of 10-year and 20-year Treasury bonds rose by 0.49bp and 0.2bp respectively from the previous week.
From the perspective of the year, the difference in the yield trend of various maturity treasury bonds is more significant, and the decline in short-term treasury bond yields is more significant than that in medium- and long-term Treasury bond yields. The January, June and 1-year yields fell by 25.69bp, 21.41bp and 25.11bp respectively during the year, while the 5-year and 10-year Yields fell by 8.66bp and 1.76bp respectively during the year.
As a result, the steepness of the Treasury yield curve improved last week, the maturity spread widened, and the maturity spread between the 10-year and 1-year Treasuries rose to 76.6bp from 68.6bp in the previous week, an increase of 11.7%.
The yields of policy bank bonds continued their previous downward trend, with yields on 10-year CDB bonds, import and export bank bonds and Agricultural Development Bank bonds down 0.49bp, 1.78bp and 0.93bp respectively from the previous week. From the perspective of the year, the cumulative decline in yields of 10-year CDB bonds, import and export bank bonds and agricultural development bank bonds was 9.43bp, 5.06bp and 5.06bp, respectively.
The spread between CDB bonds and treasury bonds is also falling in tandem. As of April 15, the spread between the 10-year CDB and Treasury bonds was 23.13bp, down 7.67bp during the year.
2) Credit debt
From the perspective of credit bond yields, the yields of various varieties of bonds last week still continued the previous downward trend, but the decline rate slowed down from the previous week. Specifically, among AAA-rated bonds, the yields of 5-year commercial bank bonds, corporate bonds, corporate bonds, asset-backed securities and medium-term notes fell by 1.98bp, 4.02bp, 3.68bp, 4.15bp and 4.22bp respectively during the week, and the yields of 1-year short-term financing bonds fell by 4.72bp during the week; in AA-rated bonds, the yields of 5-year commercial bank bonds rose by 0.02bp during the week, and the yields of 5-year corporate bonds, corporate bonds, Yields on asset-backed securities and medium-term notes fell by 4.03bp, 5.12bp, 4.15bp and 4.27bp respectively during the week, and yields on 1-year short-term financing notes fell 3.62bp during the week.
In addition, the yield spread between various types of credit bonds and Treasury bonds also continued to decline last week, and the downward speed has slowed down. Specifically, among AAA-rated bonds, the spread between 5-year commercial bank bonds, corporate bonds, corporate bonds, asset-backed securities and medium-term notes and treasury bonds decreased by 1.84bp, 3.88bp, 3.54p, 4.01bp and 4.08bp respectively during the week, and the spread between 1-year short-term financing bonds and treasuries rose by 2.79bp during the week; in AA-grade bonds, the spread between 5-year commercial bank bonds and treasury bonds rose by 0.16bp during the week, and the spread between 5-year corporate bonds and corporate bonds rose by 0.16bp during the week. Spreads between asset-backed securities and medium-term notes and Treasuries decreased by 3.89bp, 4.98p, 4.01bp and 4.13bp respectively during the week, and the spread between 1-year short-term financing bonds and Treasuries rose 3.89bp during the week;
4. Stock market
1. Primary market
Last week, A-shares raised a total of 30.364 billion yuan. Judging from the 4-week rolling average data, the upward trend of A-share weekly fundraising has been interrupted. As of April 17, the cumulative amount of funds raised by A-shares this year was 489.71 billion yuan, higher than the same period in previous years.
2. Secondary market
In the week from April 11 to April 15, major stock indexes rose and fell, with the Shanghai Composite Index changing at -0.24% per day, the SME Index at -0.66%, and the ChiNext Index at -0.84%. From the perspective of the risk premium of the major stock indexes (the year-on-year change in the stock index minus the 10-year Treasury yield), the risk premium of the stock market fluctuated in a narrow range last week, the risk premium of the Shanghai Composite Index rose, and the risk premium of the small and medium-sized board index and the ChiNext index continued to decline, with the average values of the three in the week -9.04%, -13.60% and -13.31% respectively.
Last week, the overall trading volume of A shares continued to decline, and the average daily trading volume fell to 908.414 billion yuan. In addition, the overall valuation of A-shares also declined synchronously, and the price-earnings ratio weighted by the weighted market value of each board was about 22.13, down about 4.41% from the previous week. The difference between the balance of financing and the balance of margin has dropped from 1.49 trillion yuan in the previous week to 1.46 trillion yuan.
Fifth, policy dynamics
1. China's monetary and credit policy
1) On April 15, Chinese Min Min Bank issued an announcement to reduce the reserve requirement ratio of financial institutions by 0.25 percentage points on April 25, 2022 (excluding financial institutions that have implemented a 5% reserve requirement ratio).
2) On April 18, the Chinese Bank of China and the State Administration of Foreign Exchange issued the Notice on Doing a Good Job in Financial Services for Epidemic Prevention and Control and Economic and Social Development (hereinafter referred to as the "Notice"), proposing 23 policy measures to strengthen financial services and increase support for the real economy from three aspects: supporting the bailout of troubled entities, smoothing the circulation of the national economy, and promoting the development of foreign trade exports. The "Notice" pointed out that it is necessary to give play to the dual functions of monetary policy total and structure, and increase financial support for industries, enterprises and groups affected by the epidemic. Chinese Minmin Bank will maintain reasonable and sufficient liquidity, guide financial institutions to expand loan delivery, and make reasonable concessions to the real economy. Increase the amount of small and micro loans for supporting agriculture in a timely manner, make good use of inclusive small and micro loan support tools, provide incentive funds according to 1% of the increase in the balance of inclusive small and micro loans of local legal person financial institutions, and continue to use the 400 billion yuan of refinancing amounts originally used to support inclusive small and micro credit loans, so as to promote the tilt of financial resources to enterprises, industries and regions affected by the epidemic. Ensure the timely and accurate direct access of tax rebate funds, and promote market entities to enjoy policy dividends as soon as possible. For the trapped people, financial institutions should flexibly adopt reasonable delay in repayment time, extend loan term, delay repayment and other ways to support, and relevant overdue loans can be submitted without overdue records.
2. China Monetary Policy
1) On April 11, the China Securities Regulatory Commission, the State-owned Assets Supervision and Administration Commission and the All-China Federation of Industry and Commerce jointly issued the Notice on Further Supporting the Healthy Development of Listed Companies (hereinafter referred to as the Notice) to further support the development of listed companies and maintain the stability of the capital market. The "Notice" makes it clear that it is necessary to create a good development environment and stabilize the expectations of enterprises. The first is to adhere to the "two unwavering", treat all kinds of market entities equally, do not set any additional conditions and invisible thresholds, and create a market environment of fair competition. Support private enterprises to go public for financing, mergers and acquisitions and reorganizations in accordance with the law, improve the bond financing support mechanism for private enterprises, stimulate the vitality and creativity of private enterprises, and give full play to the important role of private listed companies in stabilizing growth, promoting innovation, increasing employment, and improving people's livelihood. The second is to adhere to the "housing and not speculation", support listed housing enterprises to actively transform to a new development model in accordance with laws and regulations, strengthen their own risk management, pay close attention to the market situation and industry changes, strictly prevent and properly resolve various risks, and promote the virtuous cycle and healthy development of the real estate industry. The third is to implement supportive policy arrangements such as enterprises in areas seriously affected by the epidemic and enterprises in the field of epidemic prevention and control through capital market financing, mergers and acquisitions and restructuring. Exempt listed companies from the 2022 listing preliminary fee and annual fee, online voting service fee and other fees, and reduce the burden on enterprises. The fourth is to improve the institutional mechanism conducive to long-term institutional investors' participation in the capital market, encourage and support social security, pension, trust, insurance and financial management institutions to allocate more funds to equity assets, and increase capital market investment, especially the stock investment of high-quality listed companies.
2) On April 15, the Shanghai and Shenzhen Stock Exchanges solicited opinions from the public on the recently drafted guidelines related to the expansion mechanism of public REITs. The two major exchanges said that in order to better play the functional role of public REITs, further promote the virtuous cycle of investment and financing, and help the development of the real economy, the Shanghai and Shenzhen Exchanges have studied and drafted the Guidelines for Newly Purchased Infrastructure Projects by drawing on the experience of the overseas REITs market and referring to the relevant provisions on major asset restructuring and refinancing of listed companies. The Guidelines for Newly Purchased Infrastructure Projects are the basic rules for the Exchange to regulate and guide the new purchase of infrastructure projects and related expansion and information disclosure during the existence of infrastructure funds, and stipulates key matters such as important nodes in the whole business process of newly purchased projects and the sale of expansion shares.
3. Overseas central bank policies
1) On April 13, the Bank of Canada announced a 50 basis point rate hike to 1% and will stop buying government bonds on April 25, in line with market expectations. This is the Bank of Canada's largest single rate hike since 2000.
2) On April 14, John Williams, a member of the Fed's Open Market Operations Committee and chairman of the New York Fed, said that the Fed would bring inflation back to 2%, that a single 50 basis point hike would be a reasonable option, and that it would be reasonable to act quickly.
3) On April 14, the European Central Bank announced the results of its April interest rate meeting, leaving the three key interest rates unchanged and reinforcing the expectation that the Asset Purchase Program (APP) will end net purchases in the third quarter. Ecbbank President Christine Lagarde pointed out in a post-meeting press conference that the timing of the end of the asset purchase program may be advanced or delayed, and its exact time will be assessed in June; the period between the end of the asset purchase program and the interest rate hike is "one week to several months"; and the ECB has not yet built new policy tools, but will continue to improve the policy toolbox in the future, designing any flexible tools needed.
Text | Liu Xin, He Xiao, researcher of the First Institute of Finance and Economics
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