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On May 13, the Ministry of Finance officially announced the "2024 General Treasury Bonds and Ultra-long-term Special Treasury Bonds Issuance Related Arrangements", of which 30-year ultra-long-term special treasury bonds will be issued on May 17, 20-year ultra-long-term special treasury bonds will be issued on May 24, and 50-year ultra-long-term special treasury bonds will be issued on June 14.
Ultra-long-term special government bonds are not included in the public budget and are not included in the deficit ratio, so they have a low financing cost. Since its issuance period is usually more than 10 years, it is especially suitable for major strategic projects with large investment amounts and long return cycles. This characteristic makes the ultra-long-term special treasury bonds have a high degree of adaptability to the infrastructure industry, which can effectively support the long-term development of national infrastructure construction.
Shi Shihua, a researcher at the Chinese Academy of Fiscal Sciences, believes that the issuance of ultra-long-term bonds is of positive significance for alleviating the pressure of short- and medium-term repayment and extending the cycle of the entire capital function. This arrangement helps to optimize the debt structure, reduce fiscal risks, and provide stable financial support for the country's long-term development.
However, the issuance of ultra-long-term special treasury bonds may also cause some disruption to the bond market. In order to hedge this impact, Guohai Securities proposed in its latest report that the RRR and interest rate cuts in May and June are likely to be implemented. This policy mix aims to stabilize market expectations, reduce the cost of fiscal issuance, and provide a more accommodative monetary environment for economic development.
The RRR cut is an act by the central bank to reduce the reserve requirement ratio of financial institutions. By lowering the reserve requirement ratio, the central bank can increase the amount of money available for banks to lend, thereby stimulating economic growth and promoting active credit markets. This policy tool is often regarded as an important means to adjust the level of money supply and interest rates, and is of great significance for stabilizing financial markets and supporting the development of the real economy.
Although the concentrated issuance of bonds may have a certain impact on the market capital pressure, brokerage analysts generally believe that the policy tools of RRR and interest rate cuts still need to be used in a timely manner.
Changes in benchmark interest rates in the banking sector
From the perspective of deposit interest rates, since 1994, the benchmark deposit interest rate in mainland China has experienced a return to a high level, and has remained at a historical high, and has remained unchanged for more than seven years. According to the data of the People's Bank of China, as of February 2023, the benchmark interest rates of various deposits in mainland China are: demand deposit interest rate of 0.35%, 3-month time deposit interest rate of 1.1%, 1-year time deposit interest rate of 1.5%, 3-year time deposit interest rate of 2.75%, and 5-year time deposit interest rate of 4.75%. This stable interest rate contributes to the stable development of the market and is more suitable for China's economic development model and financial market conditions.
The banking industry represents the issuance of loans and the absorption of deposits
Judging from the performance of representative enterprises in the banking industry, in the first three quarters of 2022, ICBC's loans and advances and deposits absorbed reached the highest level, reaching 22.30 trillion yuan and 30.09 trillion yuan, respectively. In addition, state-owned banks remain industry leaders in lending and deposits. Compared with joint-stock banks, the gap between the amount of deposits absorbed and the amount of loans issued by state-owned banks is larger, indicating that residents are more willing to trust state-owned banks, and even though joint-stock banks offer higher deposit rates, residents still consider state-owned banks to be better suited to their risk appetite.
Note: The data in this chart is updated to the third quarter of 2022
Peng Peng, executive chairman of the Guangdong Provincial Institutional Reform Research Association, said that the current measures to encourage long-term capital to enter the market and announce the inflow of northbound funds are conducive to reducing the short-term speculation effect and promoting investors to form common interests with the country. The issuance of ultra-long-term special treasury bonds, as well as the reduction of medium and long-term deposit products by banks, may be of great significance to insurance funds and social security funds.
Gao Ruidong, chief economist of Everbright Securities, said that based on the previous experience in the issuance of special treasury bonds, it is expected that the issuance interest rate will refer to the interest rate of relevant maturity treasury bonds in the secondary market. It is expected that with the issuance of ultra-long-term special treasury bonds, the pace of fiscal spending will continue to accelerate, further boosting aggregate demand. Support for people's livelihood and well-being and scientific and technological innovation will also be stronger, which will strongly support the continuous improvement of the overall economic situation.
Prospective Economist APP Information Group
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