When localized bonds are in progress: the issuance of urban investment bonds has decreased sharply, and the prepayment has soared

With the process of localized bonds, the issuance of urban investment bonds, which is extremely hot, has been declining. Wind data shows that since September, the number and scale of urban investment bond issuance have been declining month by month, and the net financing amount has entered negative growth since November, and the scale of negative growth has further expanded in December. On the other side of the coin, the prepayment of urban investment bonds has soared, with the total prepayment amount reaching nearly 100 billion yuan since October.

"The decline in the issuance scale of urban investment bonds is mainly due to the stricter approval of urban investment bonds after Circular No. 35 (referring to the "Guiding Opinions on the Debt Resolution of Financial Support Financing Platforms"), and now it can basically only borrow new to repay the old, and cannot add new ones. A person from the investment banking department of a small and medium-sized bank told reporters.

Since the introduction of the local debt package, urban investment bonds have become a hot spot to be scrambled, and the interest rate on urban investment bond issuance has been declining, with the weighted average coupon rate falling from 5.03% in December last year to 3.73% in November this year, and it is still falling further in December. Under the reduction in the supply of urban investment bonds, the "asset shortage" has further intensified, and some investment institutions can only "sink appropriately" in the stock of urban investment bonds to find some suitable targets. Under the strict control of Circular 35, many interviewees believe that the reduction in the supply of urban investment bonds will become a trend.

Net financing showed negative growth

The issuance of urban investment bonds, which are highly sought after by institutional investors, is decreasing. Wind data shows that the scale of urban investment bond issuance in November this year was only 282.4 billion yuan, only about half of the scale issued in August. The number and amount of urban investment bonds issued decreased significantly every month, with the issuance volume in September, October and November decreasing by 24.28%, 18.09% and 18.57% respectively month-on-month.

"The main reason is the tightening of the policy, the market demand is still relatively strong, including some areas that were difficult to develop before have also become hot areas, and a relatively low price can also be issued. The above-mentioned small and medium-sized bank investment banking department said.

Under the increasingly stringent approval policy, the number of urban investment bonds reviewed and reported as "terminated" by the exchange has reached a new high, and the data of Enterprise Early Warning shows that as of December 18, a total of 209 urban investment bond projects have been terminated by the exchange in 2023. The number of urban investment bonds terminated since October has increased significantly, and a total of 51 urban investment bonds to be issued were terminated in November, a record high, making it the largest number of terminated urban investment bonds in 2023. As of December 18, 24 have been terminated. At the beginning of 2023, as of December 18, the majority of the entities that received the termination approval were district-level and county-level platforms, accounting for about 55.5%, and prefecture-level platforms accounted for about 27.23%. The main rating is AA, accounting for about 54.97%, followed by AA+. When analyzing the reasons for the termination of the approval of urban investment bonds to a new high, the relevant research report of Huafu Securities believes that the stronger the attributes of urban investment or the greater the possibility of hidden debts involved, the higher the proportion of termination.

At the same time, not only are there fewer new urban investment bonds, but urban investment companies are still struggling to repay existing debts. In the past two months, the repayment scale of urban investment bonds has been relatively large, including the early redemption and redemption scale, and the amount of early redemption and redemption of urban investment bonds in the first half of December has exceeded that of November. As a result, the net financing amount of urban investment bonds has been negative since November (that is, the repayment amount is more than the amount raised by bond issuance), which is -70.716 billion, and the negative growth scale in the first half of December has further expanded to 176.834 billion.

Prepayments skyrocketed

The reporter learned that some urban investment companies have repaid their debts in advance in batches, especially the high-cost urban investment bonds have become the focus of compression. For example, Guizhou Gui'an Development Group recently plans to repay about 8.885 billion yuan of urban investment bonds in advance in one go. On December 5th and 11th, Guizhou Gui'an Development Group issued a total of 6 announcements to pay the principal of 6 bonds in advance, with a total of 8.885 billion yuan in advance, and the 6 bonds were "20 Gui'an G1", "22 Gui'an G2", "22 Gui'an G1", "18 Gui'an 01", "19 Gui'an G1" and "20 Gui'an G2", with coupon rates between 6% and 7.6%.

At the same time, Guizhou is also issuing special refinancing bonds in batches. On December 8, the Guizhou Provincial Department of Finance announced on the China Bond Information Network that it will issue 2023 Guizhou Provincial Government Refinancing General Bonds (20-21), all of which are refinancing bonds for the purpose of repaying existing debts. The issuance results show that the issuance scale of the twentieth issue is about 5.498 billion, and the coupon rate is 2.73%. The issuance size of the 21st phase is 6 billion, and the coupon rate is 2.83%. Compared with Guizhou Gui'an Development Group's early repayment of urban investment bonds, the financing cost is greatly reduced. According to the data of Enterprise Early Warning, as of December 19, 2023, Guizhou has issued 22 special refinancing bonds in just over two months since October 2023, with a total financing of 240.844 billion.

A number of analysts told reporters that according to the current idea of reducing debt, strictly control the increase of urban investment bonds, and at the same time allow the issuance of refinancing bonds to repay existing debts, which is equivalent to replacing high-cost urban investment bonds with low-cost refinancing bonds, and replacing implicit debts with local statutory debts.

"The spirit of Circular 35 is to 'close the door and open the right door', which not only better resolves debt risks, but also helps local governments reduce financing costs. A large brokerage analyst believes. In the early years, the interest rate of urban investment bonds was once "terrible", and the current idea of debt reduction not only ensures the continuation of financing (refinancing bonds), but also reduces financing costs.

According to the data of Enterprise Early Warning, as of December 19, the total amount of early repayment since October reached nearly 100 billion, and the monthly repayment amount reached a peak in December, and as of December 19, the amount of early repayment in the month has reached 47.229 billion. In fact, after entering October, the number of urban investment bonds announced for early repayment began to increase significantly, with 44 and 49 announcing early repayment in October and November respectively, compared with the monthly average of 15 in the first nine months of this year, and the number of urban investment bonds announced for early repayment as of December 19 has reached 65.

Special refinancing bonds shoulder the heavy responsibility of reducing debts

With the implementation of the "package of bonds", the issuance of special refinancing bonds has been accelerated since October this year. For example, the above-mentioned refinancing bonds issued by Guizhou Province are issued for the purpose of reducing hidden debts, and the purpose is to repay existing debts.

Special refinancing bonds have been issued since December 2020 and have become an important means for local governments to resolve hidden debts. Generally speaking, ordinary refinancing bonds will disclose the "which local government bond to repay" in the information disclosure document, which is mainly used to repay the maturity principal of the local government bond. Since December 2020, the use of funds for some refinancing bonds has been changed from "repayment of the principal of maturing local government bonds" to "repayment of the principal of existing government debt", which is mainly used for the replacement of local implicit bonds, known as special refinancing bonds.

"Different from ordinary refinancing bonds that 'repay the principal of maturing debts', special refinancing bonds are used to 'repay existing debts', and the local government repays the principal and interest, which is essentially the explicit nature of local debts and the repayment of old debts by borrowing new ones. Zeping macro research report said.

According to the statistics of Zeping Macro Research Report and the 21st Century Asset Management Research Institute, the first round was mainly used from December 2020 to September 2021, mainly for the pilot expansion of hidden debt resolution in established counties, with a total of 612.8 billion special refinancing bonds issued. The second round will be from October 2021 to June 2022, mainly used for the pilot project of no hidden debts in Beijing, Shanghai and Guangdong, with a total issuance of 504.2 billion yuan. According to the data of Enterprise Early Warning, as of December 20, this round of special refinancing bonds has been issued a total of 1.76 trillion yuan, and the number of issuances in areas with high debt pressure, such as Guizhou, Yunnan and Tianjin.

According to the statistics of CSI Pengyuan Research Report, some provinces have a large scale of refinancing bond issuance and a small balance limit, resulting in the balance of local bonds exceeding the limit after the issuance of special refinancing bonds, such as Guizhou, Yunnan, Inner Mongolia, Tianjin, Jilin, Chongqing, Hunan and other places.

"The provinces that exceed the limit after the issuance of this round of refinancing bonds are expected to redistribute the balance limit of surplus areas to these provinces through the cap-redistribution mechanism, so as to ensure that the debt balance of these provinces remains within the limit. The above-mentioned CSI Pengyuan research report said.

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