After talking about government bonds, let's look at another type of government bond: local government bonds.
There have been many in-depth introductions to local government bonds, and today we will make a basic analysis of local government bonds.
Local government bonds are divided into general bonds and special bonds,
- General bonds are government bonds issued for public welfare projects without income, mainly using general public budget revenue as the source of funds for debt and interest repayment;
- Special bonds are government bonds issued for public welfare projects with a certain income, and the income of the government fund corresponding to the public welfare project or special income is used as the source of funds for repayment of principal and interest.
Like national debt, the difference between the two is judged by definition,
The corresponding projects are different: general debt is used for public welfare projects without income, and special debt is used for public welfare projects with income;
The sources of repayment are different: general debt is repaid with general public budget revenue, and special debt is repaid with government fund income or special income.
For definitions, I need to focus on one word, "project."
Whether it is a general bond or a special bond, it is used for the project,
Therefore, the funds used for general bonds and special bonds are only used for project construction, and cannot be used for repayment of loans when due, and cannot be used for daily revenue and expenditure of local finances.
Well, since the guys opened the article and saw this,
I hope you must read on, because of the concept here, I will revise it below.
Follow my train of thought and watch slowly.
Previous article"How much do you know about the mainland's national debt?" I mentioned:
There are generally three types of funds for bonds: project construction, replenishment of liquidity funds and repayment of mature borrowings.
How come to local government bonds, which are not applicable?
Actually, it's not inapplicable.
Rather, local government bonds are used differently,
Local government bonds are further classified and given corresponding names, namely:
New bonds, refinancing bonds and replacement bonds.
New general bonds and special bonds for project construction;
Refinancing of general bonds and special bonds to repay general and special bonds as they mature;
The replacement of general bonds and special bonds is used to replace the general debt and special debt of local governments, which actually supplements the liquidity funds for fiscal debt payment.
Therefore, the definition of general debt and special debt at the beginning essentially refers to the addition of new general debt and special debt.
However, our daily contact is more about new general bonds and special bonds, which are directly referred to as general bonds and special bonds when communicating business, and if they are refinancing bonds or replacement bonds, they will be specially prefixed.
Don't get confused.
Here, I will briefly introduce the difference between refinancing bonds and replacement bonds for everyone to better understand.
Refinancing bonds, relatively easy to understand, is to repay maturing local government bonds, and the object of repayment is local government bonds.
However, note that refinancing bonds can only repay the principal of maturing local government bonds.
Replacement bonds, which are used to replace the existing debt of local governments.
The scope of local government stock debt is greater than that of local government bonds, including bonds such as local government bonds, bank loans, enterprise bonds, and financing from non-bank financial institutions such as project payments payable, and trust financing.
Some friends may wonder, how can bank loans, corporate bonds, trust financing and these debts become local government stock debts?
Yes, theoretically no, these landed debts are the debts that were previously borrowed through platform companies, and the responsibility for repayment lies with local governments.
This is the hidden debt of local governments.
After the issuance of replacement bonds, local hidden debts are transformed into local explicit debts.
At the national level, these debts can be managed "justifiably";
For localities, there are also two major benefits:
On the one hand, the maturity period of these debts has been extended, which has eased the debt service pressure to a certain extent;
On the other hand, the original financing cost of these debts is relatively high, such as bank loans and trust financing, and after replacing the bonds, the financing cost is greatly reduced, reducing the pressure on local governments to pay interest.
Replacement bonds will basically no longer be issued after 2020, so the local government bonds issued now are mainly new bonds and refinancing bonds.
Local government bonds, all of which are book-entry fixed-rate interest-bearing bonds.
What is a book-entry fixed rate interest-bearing bond?
How much do you know after reading "The Mainland's National Debt?" , I believe everyone is no stranger to it,
It's similar to book-entry interest-bearing treasury bonds.
The issue price is the face value of the bond of 100 yuan, which is calculated at a fixed coupon rate, with regular interest payment and a lump sum repayment of principal at maturity.
Earlier, a small partner asked, is there any documentary basis for local government bonds with a maturity of less than 10 years and once a year every six months?
It may be that the relevant regulatory documents of local government bonds are all overcome, and the relevant provisions cannot be found.
In fact, the interest payment method of local government bonds refers to book-entry interest-bearing government bonds.
After all, government bonds and local government bonds are government bonds.
There are nine types of local government bonds: 1 year, 2 years, 3 years, 5 years, 7 years, 10 years, 15 years, 20 years, and 30 years.
Can you name a few differences from the maturity of the treasury bond?
1. Local government bonds do not have short-term bonds, that is, they are not less than 1 year, there are treasury bonds, and the maturity of book-entry discounted treasury bonds is within 1 year;
2. The maximum maturity of local government bonds is 30 years, which is lower than the maximum maturity of government bonds of 50 years;
3. Local government bonds have 2 more maturities than government bonds, 15 years and 20 years, but government bonds do not.
During the issuance process, local government bonds have maintained a "close" relationship with government bonds.
Bond partners know that in the pricing of the primary and secondary markets of bonds, most bonds will use the recent yield of the bond as a reference.
Since its issuance, local government bonds have always referred to the yield curve of government bonds, because it does not have its own yield curve.
Therefore, in the issuance documents of local government bonds, you will see such a sentence:
"The bidding bid range is between the arithmetic average of the yield of government bonds with the same outstanding period and the average value of the yield of Chinese bonds in the yield curve of Chinese bonds published by China Bond Information Network 1 to 5 working days before the bidding date."
Basically, it is about 15%-20% on the basis of the yield of government bonds of the same maturity, which varies from place to place.
Until February 25, 2022, the Ministry of Finance officially released the "Ministry of Finance - China Local Government Bond Yield Curve", with the curve term set to a total of 9 maturities from 1 to 30 years, fully covering all issuance periods of local bonds.
Subsequently, Guangdong Province and Shenzhen began to experiment with the local government bond yield curve as the pricing benchmark for issuing local government bonds.
Finally, let's compare general debt with special debt.
In the first definition section, we have made a simple distinction,
General debt is for public welfare projects with no income; Special bonds are aimed at public welfare projects with certain returns;
Theoretically, general debt and special debt are mutually exclusive;
If a project issues general bonds, which means that it has no income, then there is no way to issue special bonds, because there is no source of repayment without income;
If a project issues special bonds, indicating that the project has income, then it cannot issue general bonds, and if it cannot have revenue, it will use the government's general public budget revenue to repay the debt.
However, in reality, many projects without income are also packaged and combined, and special bonds are applied.
Why?
Why don't these projects without income directly apply for general debt, and there is no need to compile "one case, two books" issuance materials, how convenient.
Because the general debt quota is too small, the special debt quota is relatively large.
Local government bonds implement a quota approval system, and they must apply for quota from the Ministry of Finance before they can be issued.
Let's look at the changes in the amount of local government bonds since the introduction of local government bonds in 2015.
Special bonds show an upward trend, and general bonds show a downward trend.
Here special debt and general debt are all data including new debt, refinancing debt and replacement bond;
Simply look at the new ones,
In 2022, 4,756.6 billion yuan of new local government bonds will be issued nationwide, including 718.2 billion yuan of general bonds and 4,038.4 billion yuan of special bonds.
The general debt is only more than 700 billion yuan, and the amount of tens of billions is small when distributed to various places, where is it enough.
Therefore, it has also spawned such activities as project packaging and project planning.
How to reasonably package the project, and reasonably package the projects with and without income together, so that the total income of the project covers the financing principal and interest of the bond.
Does the state encourage packaging?
Support reasonable packaging and encourage integrated development.
To put it bluntly, isn't the EOD launched now the most typical model of ecological environmental protection and industrial integration development?
The last small question, why is the amount of general debt getting smaller and smaller?
Although both are used for project construction,
However, general debts are uniformly repaid with the general public budget revenue of local finance, and occupy the general public budget revenue;
The special debt is to be repaid by the income generated by the project itself, which can be balanced within the project, and is included in the management of government funds, and is not included in the fiscal deficit.
No matter how much it is issued, it will not use the general public budget revenue, after all, there are too many places where the general public budget revenue needs to be used.
Everything evolves for intrinsic reasons, and business is no exception.
Okay, that's it for today.
It is hoped that through the basic analysis of government bonds and local government bonds, everyone will have a deeper understanding of the mainland's government bonds.
