Market hotspots
Continuing last year's momentum, the bond market continues to strengthen this year. Driven by multiple factors such as weak economic fundamentals, loose monetary policy and increased demand for institutional allocation, bond yields fell more than expected. So, what are the differences between this round of bond bull market and previous rounds?
Historically, the bond market cycle is backed by the economic, monetary and policy cycles. A typical example is the global financial crisis in 2008, when China's economic data slowed down and bond market yields fell, showing typical bull market characteristics. After entering 2009, with the introduction of economic stimulus policies, the domestic macro economy gradually bottomed out, bond yields rose significantly, and the bond market showed significant bear market characteristics.
However, in recent years, the internal logic of bond fluctuations and the framework of bond investment have undergone great changes, and the core reason is that the fluctuations of the macroeconomic cycle have narrowed significantly, and the macroeconomic policies have become more stable and long-term. In the long run, in the context of macroeconomic structural transformation and de-real estate, and in the context of the economic shift to high-quality development, the downward shift of China's economic potential growth rate may be long-term, and the downward trend of bond yields may also be a long-term trend. Therefore, from a long-term perspective, the overall opportunities in the bond market outweigh the risks, and every fluctuation and correction in the bond market is an opportunity, and the bond bull market cycle is expected to be significantly extended.
Funding side
Last week, the central bank carried out an average of 2 billion yuan of reverse repurchase operations every day, and the cumulative net withdrawal of reverse repurchase for the whole week was 394 billion yuan. Under the large net withdrawal of the central bank, the funding rate is still running in a low range, and the interbank liquidity is relatively stable and abundant.
Interbank repo rate
Bond market
In the secondary market, the interest rate on certificates of deposit fell sharply due to the impact of the low funding rate. Among them, the interest rate on 1-year certificates of deposit fell by 12bp to 2.08%, the interest rate on 3-month certificates of deposit fell by 3bp to 1.95%, and the 1-year certificates of deposit hit a new low this year.
In terms of interest rate bonds, the market has fluctuated and the yield curve has steepened significantly. The 240004 of 10-year active bonds fell by 1.1bp, and the 240205 of 10-year CDB active bonds fell by 1.25bp. The short- and medium-term spreads exceeded the long-term ones, and the spreads between Treasury bonds and CDB 10-3, 10-5 and 10-7 all rose sharply, mainly due to the impact of the sharp decline in 3-7 year interest rates.
Interbank Certificate of Deposit interest rate
CDB bond yield
Convertible bond market
Last week, the CSI Convertible Bond Index rose 0.77%, the Shanghai Composite Index rose 0.92%, and the Wind All A Index rose 0.99%. The Wind Convertible Bond Equal Weight Index rose 0.93%, and the Wind Convertible Bond Equal Equity Index rose 2.13%. Among them, the small-cap style of convertible bonds is relatively dominant, with the Wind Convertible Bond Large Cap Index up 0.37%, the Mid-Cap Index up 1.2%, and the Small-Cap Index up 1.01%. The weighted average conversion premium of convertible bonds decreased by 1.6 pct from last week.
Convertible bond market performance
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