According to the notice of the Ministry of Finance, a mobilization meeting for ultra-long-term treasury bonds will be held at 9 a.m. today. Starting at 10 o'clock in the morning, affected by market news, 10-year and 30-year treasury bond futures rose, up 0.18% and 0.81% respectively, and the highest was 104.48 yuan and 106.57 yuan respectively.
A number of institutions told the Financial Associated Press that today's market news said that ultra-long treasury bonds are divided into 20-year, 30-year and 50-year tenors, and a total of 22 issuances were issued from the initial offering on May 17 to the end of November.
At noon, the Ministry of Finance officially announced the "2024 General Treasury Bonds and Ultra-long-term Special Treasury Bonds Issuance Related Arrangements", deciding to issue 30-year ultra-long-term special treasury bonds on May 17, 20-year ultra-long-term special treasury bonds on May 24, and 50-year ultra-long-term special treasury bonds on June 14. The content of the issuance plan is basically consistent with market rumors.
On May 13, the chief fixed income of a large brokerage firm in Shanghai told the Financial Associated Press that the market was boosted by the news of the meeting in the morning, and the 10-year and 30-year treasury bond futures rose significantly.
The person believes that the current multi-frequency and small-amount plan shows that the Ministry of Finance is "not in a hurry" to issue and fully considers the market's ability to bear it every month; Secondly, it also confirms the previous statement, after the issuance of 1 trillion special treasury bonds at the beginning of the year, the urgency of the issuance of ultra-long treasury bonds is decreasing.
On April 17, the relevant person in charge of the National Development and Reform Commission confirmed that in February this year, the National Development and Reform Commission completed the issuance of all three batches of projects with a total of 1 trillion yuan of additional treasury bonds, and implemented the additional treasury bond funds to about 15,000 specific projects. Since March, the National Development and Reform Commission (NDRC) has established an online scheduling mechanism to urge projects to speed up construction.
Wang Jianfan, director of the Budget Department of the Ministry of Finance, said at a press conference held by the State Council Information Office on April 22 that the issuance scale in the first quarter was smaller than in previous years, on the one hand, in response to the impact of special factors such as the impact of the epidemic in previous years, the increase in the scale of issuance at the beginning of the year, on the other hand, it is also related to the demand for local project construction funds, construction conditions in winter and spring, bond market interest rates and other factors, and a lot of work has been done to improve the quality of special bond projects and strengthen the preliminary preparation of projects.
On May 13, a private bond trader in Hangzhou told the Financial Associated Press that the ultra-long treasury bond issuance plan has finally landed, and the overall policy orientation is good; Judging from the current understanding of the issuance plan, it is a good thing to ease the supply of the bond market, and the market will now focus on the capital side and trading opportunities.
The issuance rhythm has been lengthened beyond market expectations
A number of institutions told the Financial Associated Press in early trading that today's market news said that ultra-long treasury bonds are divided into 20-year, 30-year and 50-year maturities, and a total of 22 issuances were issued from the initial offering on May 17 to the end of November. Near noon, the relevant arrangements officially disclosed by the Ministry of Finance were basically in line with market expectations.
Previously, the latest report of Guohai Securities believed that the issuance window of special/additional treasury bonds generally did not exceed 2 months.
As of the end of April 2024, Guohai Securities has just exceeded half of the issuance plan disclosed by the local government in the first and second quarters of the year, and the issuance progress is significantly lagging behind. Recently, the pace of local special bond issuance may have increased.
Considering that June and July are the peak periods for the issuance of local special bonds, which may overlap with the issuance period of ultra-long-term special treasury bonds, the impact on the bond market is worth paying attention to.
The above-mentioned analyst of a brokerage firm believes that if the issuance cycle of ultra-long treasury bonds is extended, it may mainly consider factors such as conflicts with local bond issuance and market capital impacts.
The reporter of the Financial Associated Press noted that the issuance of 1 trillion special treasury bonds in 2023 was completed in the fourth quarter of last year, and the use cycle was completed in February this year.
On April 17, the relevant person in charge of the National Development and Reform Commission confirmed that in February this year, the National Development and Reform Commission completed the issuance of all three batches of projects with a total of 1 trillion yuan of additional treasury bonds, and implemented the additional treasury bond funds to about 15,000 specific projects. Since March, the National Development and Reform Commission (NDRC) has established an online scheduling mechanism to urge projects to speed up construction.
At the same time, the person also said that local government special bonds, the issuance of additional treasury bonds in 2023 and other important role of government investment in driving and amplifying, and actively expanding effective investment.
The data show that in the first quarter, the national fixed asset investment increased by 4.5% year-on-year, 0.3 percentage points faster than that in January ~ February, and 1.5 percentage points faster than last year, showing a steady upward trend. Among them, manufacturing investment and infrastructure investment increased by 9.9% and 6.5% respectively, maintaining a rapid growth rate; Private investment increased by 0.5 percent, and the growth rate rebounded further, accounting for 51.6 percent of the total investment.
RRR and interest rate cuts may escort the issuance of treasury bonds
On May 10, the central bank released the first quarter monetary policy implementation report, which showed that the issuance of various types of bonds increased. 5.4%。 However, the trading volume of cash bonds maintained a rapid growth. In the first quarter, the total turnover of spot bonds in the bond market was 106.9 trillion yuan, a sharp increase of 42.9% year-on-year.
In the first quarter of 2024, long-term Treasury yields declined, with the 10-year yield falling to 2.29% from 2.56% at the beginning of the year, and the 30-year yield falling to 2.46% from 2.84% at the beginning of the year, down 27 and 38 basis points, respectively.
The central bank believes that long-term government bond yields mainly reflect long-term economic growth and inflation expectations, but are also disturbed by factors such as the lack of safe assets.
However, the decline in market yields has also reduced the opportunity cost of various types of bond issuance.
On May 13, Sun Binbin, a member of Tianfeng's fixed income team, believed that under the pressure of "asset shortage", banks were unable to find suitable assets, and large banks were limited in the "asset shortage".
On May 13, a trader in the proprietary team of a commercial bank told the Financial Associated Press that the current trend is limited to liquidity shock, but it is uncertain whether large banks and insurance companies can withstand so much long-term bond supply.
According to the latest report of Guohai Securities, in order to hedge the disturbance of the bond market caused by the issuance of local bonds and ultra-long-term special treasury bonds, and not to excessively raise the cost of fiscal issuance, the RRR and interest rate reduction policies in May and June are likely to be implemented.
The above-mentioned brokerage analysts believe that although the pressure on market funds may be reduced by centralized bond issuance, the policy tools of RRR and interest rate cuts should still be used, because it is also necessary to consider the role of monetary policy tools in boosting demand and prices, not just hedging market liquidity.
In addition, the above-mentioned traders believe that the current 1 trillion yuan of ultra-long government bonds may be "insufficient", and according to the central government's plan to issue ultra-long-term special government bonds for several consecutive years starting this year, it is expected that the issuance will be rolled over next year.
(Reporter Liang Kezhi)
Editor-in-charge: Wang Shidan | Review: Li Zhen | Supervisor: Wan Junwei
(Source: Finance Associated Press)