At the end of the year and the beginning of the year, the yield of cash wealth management has risen, and it can exceed 7%

"The yield on cash management, which had been used to take care of 'living money', suddenly soared to 6%. Lili (pseudonym), an investor in Guangzhou, found that the yield of her wealth management products in the "shopping cart" in an APP had reversed, and the seven-day annualized rate of return of some R1 risk cash management products rose to 3%~6%, which was even higher than some R2 and R3 risk financial management.

In fact, Lily's experience is not unique. At the end of the year and the beginning of the year, affected by short-term factors, the yield of some banks' cash management products continued to rise. According to Choice data, as of January 7, 2024, among the 1,069 cash wealth management products with statistics, the seven-day annualized rate of return of 102 products has risen to more than 3%, and the seven-day annualized rate of return of 11 products has reached more than 4%.

Some people in the industry believe that the underlying assets of bank cash management wealth management products are mainly highly liquid money market assets. Recently, affected by special nodes, short-term funding rates have risen, and the yield of cash management wealth management products has also risen. Yields are expected to gradually return to normal ranges after that. In the long run, this year's cash management wealth management has hidden signs of breakthrough in the encirclement of similar competing products such as currency funds and deposits, with a certain advantage in yield and an expanding market scale.

7-day annualized rate of return of up to 7%

Recently, while deposit interest rates have been decreasing, the interest rates of some cash management wealth management products have risen against the trend.

On January 7, the reporter inquired about a bank APP and found that a number of cash management products have been hot recently, and the yield is at a high level. Among them, the top position in the intelligent search recommendation is SPDB Wealth Management's Tim Li Cash Treasure, with a current seven-day annualized interest rate of 3.85%. According to the product brochure, the product is an R1 low-risk open-ended fixed income product with an issue size of 5 billion yuan, which will be subscribed on December 19, 2023, and has been sold out so far.

And this high interest rate has been going on for some time. According to third-party statistics, the average seven-day annualized rate of return of the product in December 2023 is as high as 4.32%.

Coincidentally, according to Choice data, among the 1,069 cash wealth management products with updated data, 102 products currently have a seven-day annualized rate of return of more than 3%, and 11 products have a seven-day annualized rate of return of more than 4%. The latest seven-day annualized rate of return of CNCBI Wealth Management Tianli No. 103 cash management type is 4.48%, the latest seven-day annualized rate of return of a cash management class F share of Zhaoying Chaozhaojin is 4.29%, and the latest seven-day annualized rate of return of a cash management class D share of Beijing Bank Wealth Management is 4.23%.

In addition, the yield of cash management products exceeded 7%. According to Choice data, the latest seven-day annualized rate of return of Ping An Wealth Management's cash management wealth management product of "growing a certain F share every day" reached 7.4%, a new high since its establishment.

According to the product manual, this product is an R1 (low-risk) open-ended current wealth management product, which invests in deposits, bonds and other debt assets accounting for no less than 80% of the total assets of the portfolio. On December 15, 2023, the product added a Class F share. Since then, the yield of the product has begun to climb, with the yield of the product rising to 4.14% on December 18, and the seven-day annualized yield of the product rising to 5.72% and 6.23% on December 26 and December 27. On January 1, 2024, the seven-day annualized return of the product was as high as 7.45%.

In fact, at the end of the year and the beginning of the year, the yield of cash management products has indeed continued to rise. According to the statistics of Puyi Standard, the income of cash management products has been rising all the way in December 2023, and among the top 30 cash management wealth management products in terms of yield, the average 7-day annualized rate of return is 3.7444%, which is an increase from the previous period. According to the research report of CITIC Securities, the average yield of cash wealth management products in December 2023 was 2.22%, an increase of 0.05pct from November.

With yields rising, cash management deposits have shown some resilience in terms of scale. Xiao Feifei, chief analyst of the banking industry at CITIC Securities, pointed out in the research report that the scale of cash wealth management products at the end of December 2023 was about 26.88 trillion yuan, which was affected by the return of deposits at the end of the year, a decrease of about 0.55 trillion yuan from the end of November, and an average daily scale of 27.4 trillion yuan, a decrease of only about 20 billion yuan from the previous month.

Most industry insiders believe that behind the record high interest rates of cash management products, it is related to the tight capital at the end of the year and the beginning of the year, and the tail-end effect of the short-end interest rate market.

The reporter noted that after the above-mentioned products penetrate the underlying assets, they are mainly high-liquidity money market assets. For example, according to the product brochure of SPDB Wealth Management, the underlying assets of the product are cash, bank deposits, bond repurchases, central bank bills, interbank certificates of deposit and other money market instruments with a maturity of one year, and the proportion of investment in fixed-income assets is more than 80%.

Recently, due to the time point around the New Year's Eve, some funding rates have risen in stages. As of 11 a.m. on January 8, the overnight SHIBOR was at 1.5850%, down 0.30 basis points, the 7-day SHIBOR was at 1.7720%, up 0.20 basis points, and the 14-day SHIBOR was at 1.9990%, up 2.10 basis points.

"At present, the overall financial situation is loose, but the stratification phenomenon still exists. Liu Yu, chief analyst of fixed income at GF Securities, pointed out that the overall low funding rate of the overnight fund rate is currently fluctuating. The phenomenon of capital stratification still exists, which is reflected in the fact that the interest rate spread between R007 and DR007 will remain at about 30~40bp after the New Year's Eve, and it will be about 10bp in the same period of 2022 (a more relaxed period), and the current capital expectations are unstable.

Some industry insiders pointed out that the tight capital situation on New Year's Eve will make interest rates rise, thereby affecting the yield of the underlying assets of cash wealth management. For example, on December 25, 2023, the reverse repo rate of multi-maturities rose, and the annualized yield of the 7-day treasury reverse repo was close to 6% at one point. Some cash management products can raise interest rates in the short term by holding or buying exchange reverse repos.

Whether it will remain high in the future

Will the yield of cash management products remain high in the future?

In the short term, an industry insider pointed out that the yield generally matches the degree of risk, and there is no basis for high interest rates. As the market fluctuates, yields will gradually return to normal levels.

In the long run, the yield of cash management products still has certain advantages over "competing" currency funds, and many institutions are optimistic about their future prospects.

According to the research report of the Open Source Securities Research Institute, as of November 2023, although the yield of cash management wealth management products has experienced a downward trend, it still reaches more than 2.2%, which has an average advantage of 20~30bp over currency funds. There has been a phenomenon of regulatory "leveling" but yields not leveling.

Liu Chengxiang, an analyst at Kaiyuan Securities, pointed out that according to the difference in the proportion of cash wealth management and cargo base holdings at the end of the third quarter of 2023, the advantages of cash wealth management in investable properties include portfolio insurance asset management products, which penetrate the bottom layer, mostly bank deposits, interbank certificates of deposit and bonds, and it is speculated that they are mainly used to obtain high-yield agreement deposits by leveraging the advantages of insurance licenses. In addition, it also includes credit bonds such as private placement bonds, which can achieve "variety sinking" under the premise of controllable risks.

However, Liu Chengxiang further pointed out that the policy constraints on agreement deposits and trust plan investments may be coming, and the sustainability of the advantages of cash wealth management income remains to be seen.

Looking ahead to 2024, most institutions are still optimistic about the prospects of cash management wealth management. Dai Danmiao, an analyst at Guosen Securities, pointed out that since 2023, the scale of wealth management products with medium and low risk levels has shown a growing trend. The scale of cash management products accounts for 33%~36%. In 2024, wealth management products, as an alternative to deposits, will still be dominated by low volatility and stable style.

Zheng Linlin, an analyst at Southwest Securities, pointed out that looking forward to 2024, the wealth management market may benefit from the reduction of deposit interest rates, and the yield of cash management products may exceed the three-year fixed deposit interest rate, and the scale of wealth management is expected to increase steadily.