Treasury bonds also crashed, plummeting 10% and suspended! A mere 29,700 yuan caused a big disaster, or is it an oolong index?

Finance Associated Press

2024-04-08 17:44Published on the official account of Cailianpress, a subsidiary of Shanghai Poster Industry Group

Finance Associated Press, April 8 (edited by Yang Bin) Today, a rare scene occurred in the treasury bond market, with a small amount of 29,700 yuan causing a big disaster, hitting a treasury bond to the fall limit, triggering the Shanghai Stock Exchange to issue an announcement on the temporary suspension of treasury bonds intraday. The subject involved was "21 Treasury Bonds 14", down 10%, triggering a 30-minute temporary suspension.

In the eyes of industry insiders, compared with the interbank treasury bond market, the exchange treasury bond market is not active, and the abnormal transaction of "21 treasury bonds and 14" may not be representative. Today, the yield of treasury bonds of all maturities and treasury bond futures have strengthened.

The announcement said that the trading of "21 Treasury Bonds 14" showed abnormal fluctuations this afternoon. According to the relevant regulations, the Shanghai Stock Exchange suspended the trading of "21 Treasury Bonds 14" from 13:42 on April 8 and resumed trading from 14:12 on April 8. After the resumption of trading, if the bond trading fluctuates abnormally again, the Shanghai Stock Exchange can implement a second intraday temporary suspension of trading, which will last until 15:27 today.

The market time-sharing chart shows that the price of "21 Treasury Bonds 14" fell by 10% at 1:42 p.m. today, with a net price of 90.00 yuan. According to the Notice on Temporary Suspension of Intraday Trading of Bond Matching Transactions and Related Matters, if the intraday trading price of treasury bonds rises or falls by 10% or more for the first time compared with the previous closing price, the temporary suspension time is 30 minutes, and if the intraday trading price rises or falls by 20% or more for the first time compared with the previous closing price, trading is temporarily suspended until 15:27. After the resumption of trading of "21 Treasury Bonds 14" at 2:12 p.m. today, there was no further suspension due to abnormal movements.

Chart: "21 Treasury Bonds 14" today's tick trend

(Source: Choice data, compiled by the Financial Associated Press)

According to the incomplete inquiry of the Financial Associated Press, on January 3, 2017, the Shanghai Stock Exchange issued an announcement that the "15 Treasury Bonds 10" triggered a suspension due to a decline of more than 10%. On June 17, 2020, "16 Treasury Bonds 26" was temporarily suspended due to an intraday rise of more than 10%.

It should be noted that the 10-year Treasury bond active bond strengthened today, with the yield down 1.10BP to 2.2825% as of 15:30, and the yield on the 30-year Treasury bond active bond down 1.29BP to 2.4631%. In addition, treasury bond futures of all maturities on the exchange closed higher, with the main 10-year Treasury bond futures contract up 0.04% to close at 104.110, and the main 30-year Treasury bond futures contract up 0.15% to close at 106.640. And is it normal for the above-mentioned exchange treasury bonds to fall or even suspend trading?

"It is indeed very rare for Treasury bonds to fall to the limit. An asset management investment manager of a joint-stock bank told the Financial Associated Press. However, the reason for the rarity is not the trading itself, but the fact that the exchange's treasury bond market is not active compared to the interbank market. Due to the small trading volume of treasury bonds on the exchange and the discontinuous price, the price is easily disturbed by individual institutions, resulting in large fluctuations. The interbank treasury bond market is more reflective of market prices and expectations.

According to the operation of the financial market in February 2024 released by the central bank at the end of March, as of the end of February 2023, the bond market custody balance was 160.0 trillion yuan, of which the interbank bond market custody balance was 139.1 trillion yuan and the exchange market custody balance was 20.9 trillion yuan.

The custody balance of treasury bonds in the interbank market and exchanges totaled 29.7 trillion yuan. From the perspective of secondary market transactions, according to Choice statistics, the trading volume of treasury bonds in the interbank market in March was 16.13 trillion yuan, while the trading volume of treasury bonds on the Shanghai Stock Exchange was only 0.76 trillion yuan in the same period.

The full name of the above-mentioned "21 Treasury Bonds 14" is the 2021 book-entry interest-bearing (14) treasury bonds, which were listed on October 20, 2021, with a term of 30 years and a current balance of 138 billion yuan. The bond has a coupon of 3.53% and is paid semi-annually.

Prior to today, there had been no price movement in the exchange market for "21 Treasury 14". Today's transaction details show that the turnover caused by the change is only 29,700 yuan.

According to the analysis of an investor from a private equity institution, the transaction of "21 treasury bonds and 14" is very inactive, and such a low transaction can cause a 10% price drop. The transaction of the treasury bond is not representative, and the possibility of an oolong index is not ruled out.

(Finance Associated Press Yang Bin)

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