On May 13, the Ministry of Finance announced the issuance plan for general treasury bonds and ultra-long-term special treasury bonds this year, which is expected to last from mid-May to mid-November. At the same time, in order to cooperate with the Ministry of Finance's ultra-long bonds, on May 15, the central bank maintained the new MLF (medium-term lending facility) equivalent parity continuation to smooth out the fluctuation of the tax period.
The market reacted quickly, as of the close of the 15th, the medium and long-term end of the main interbank interest rate bonds pulled back slightly, the 5-year Treasury bond yield rose 0.9bp to 2.1000%, the 10-year Treasury bond rose 0.95bp to 2.2980%, and the 30-year Treasury bond yield rose 0.75bp to 2.6200%. In terms of credit bonds, real estate bonds were collectively active, and many bonds of Vanke rose by more than 10%.
In the view of industry insiders, the upcoming peak of government bond issuance is still difficult to solve the "asset shortage" under the trend of institutional underallocation, and the 10-year treasury bond may still hit a low of 2.23% in the future.
The "asset shortage" is difficult to alleviate
Whether the new round of treasury bonds, especially ultra-long-term special treasury bonds, can alleviate the current situation of "asset shortage" has attracted much attention from the market. A number of industry insiders interviewed by reporters believe that the enthusiasm of various institutions in the current market for the allocation of long-term bonds is still very high, and the opportunity to end the asset shortage has not yet been triggered.
Historically, there have been four "asset shortages" in the mainland bond market, including the current round of "asset shortages", and the first three often ended with the tightening of monetary policy. Ming Ming, chief economist of CITIC Securities, believes that this round of "asset shortage" lasts for a long time and is deep, and at the same time, institutional behavior presents new characteristics that are different from the past, that is, the phenomenon of capital stratification still exists, and at the same time, it sinks all the way to AA-rated assets in terms of credit qualifications, and extends all the way to 30-year ultra-long bonds in terms of maturity, which has exceeded the severity of previous rounds of "asset shortage".
"The underlying logic of the bond market has not changed." Liu Yakun, a fixed income analyst at China Galaxy Securities, pointed out that according to the average duration of the previous three rounds, there are about 14 months before the end of this round of asset shortage. However, at present, the pursuit of relatively safe assets by institutions has not stopped, and at the same time, the current physical demand has not improved significantly, the real estate is still running in the negative range, and the economic fundamentals and their expectations for slow recovery have not changed, superimposed on the easing of monetary policy.
The reporter noted that from the perspective of the main institutions of the bond market allocation, the allocation of long-term bonds is still "full of momentum". Wealth management added about one trillion yuan in April, which will support short-term interest rates and credit spreads, thereby improving the cost performance of ultra-long bonds. The scale of the bond base also increased by 400 billion yuan in April, and as the most active trading order, it will also undertake a large number of supply increments of special treasury bonds. At the same time, the premiums of insurance companies have grown steadily, and it is also a major trend to increase the allocation of bonds in the absence of desirable assets.
On the other hand, today's central bank maintained the continuation of MLF parity, "the operation remains moderately cautious, and the capital side is loose." Qin Han, an analyst at Zheshang Securities, pointed out that the continuation of the MLF equivalent may provide moderate liquidity support for the issuance of ultra-long-term special treasury bonds, and the liquidity premium in the secondary market of 30-year treasury bonds may be further compressed in the future.
A trader in the financial market department of a rural commercial bank in East China told reporters that even so, all parties are enthusiastic about the allocation of upcoming ultra-long bonds, and the interest rate on 30-year treasury bonds will become the consensus point of the institution to 2.5%. In other words, if the institutional underallocation pressure is not alleviated, even if the ultra-long-term special treasury bonds issued in the second quarter increase the supply of bonds, the "asset shortage" situation in the bond market may continue.
A number of industry insiders told reporters that even if the supply of government bonds peaked in May ~ June, it may not be able to alleviate the pressure of "asset shortage" under the enthusiasm of institutional allocation. Ming Ming pointed out that the current trend of institutional bond allocation is still strong, and it is not difficult to digest the incremental supply of bonds. For example, the increase in trading activity of rural commercial banks has become the norm, and their preference for long-term government bond assets has also increased. Especially in the process of the bond market correction at the end of April, rural commercial banks have a strong willingness to allocate 30-year treasury bonds with a yield of more than 2.5%.
Credit spreads are narrowing
From the perspective of causes, industry insiders generally believe that the fundamental reason for this round of "asset shortage" is that under the pressure of urban investment bonds, the demand for the real economy is sluggish, the credit is relatively insufficient, the scale of insurance and wealth management is rapidly repaired, and the equity market continues to be sluggish, resulting in a large number of institutions to increase the allocation of bonds to the market.
Specifically, the supply of high-quality credit bonds is more severe in this round of "asset shortage", and the decline in broad-spectrum interest rates has led to an extreme compression of credit spreads, driving institutions to turn to ultra-long-term government bonds. The lack of supply of high-quality credit bonds may become another major factor in the continuation of the "asset shortage".
The issuance interest rate hit a new low, which caused the spread of credit bonds, including urban investment bonds, to continue to narrow. According to Wind data, since the beginning of this year, the interest rates of credit bonds of various maturities have fallen month after month, and the overall credit bond and the main rating AAA, AA+, and AA credit issuance interest rates in April were 2.61%, 2.43%, 2.90%, and 3.14%, respectively, down 13.6bps, 15.5bps, 9.2bps and 3.5bps month-on-month, while in February, the above interest rates were 2.65%, 2.47%, 2.87%, and 3.21% respectively.
In addition, according to Flush iFinD data, the interest rate of long-term bonds issued by many AA-rated urban investment bonds has accelerated downward, and the interest rate of 8 5-year urban investment bonds issued in March has reached below 3%, and in April, this number has expanded to 35. In May, there were 23 urban investment bonds whose interest rates fell below 2%, and most of them were rated AAA with a maturity of less than 1 year.
An analyst from the fixed income team of a large brokerage firm in Shanghai said that the interest rate of credit bonds, including urban investment bonds, has continued to fall to new lows, on the one hand, because the basic interest rate has been declining, which has affected the yield of credit bonds; On the other hand, the recovery of the real economy, including the real estate sector, has weakened, resulting in a lack of high-quality investment targets.
Against the backdrop of declining coupon rates, the scale of credit bond issuance decreased month-on-month and year-on-year. According to Wind data, a total of 1.40 trillion yuan of credit bonds were issued in April, a decrease of 212.1 billion yuan month-on-month and 14.8 billion yuan year-on-year, a decrease of 13.2% and 1.0% respectively. At the same time as the issuance declined, the net financing scale of credit bonds also declined, reaching 196.2 billion yuan in April, a decrease of 106.9 billion yuan from the previous month, which is the third consecutive month that the net financing amount has been negative.
And this continued in May. Last week, the credit spreads of various types of credit bonds generally narrowed, and in terms of varieties, the credit spreads of short and medium bills narrowed by 3~9bp; The credit spread of corporate bonds narrowed by 7~12bp; The credit spread of urban investment bonds narrowed by 2~13bp.
Qiu Hua, a fixed income analyst at Xiangcai Securities, believes that the current bond market is still in a capital-led market, the "asset shortage" of the credit bond market continues, and the issuance of credit bonds in May begins to enter the off-season, and the supply shrinkage is often prone to the stock grabbing market.
Liu Yakun pointed out that the underlying logic of the fundamentals has not been reversed, the probability of asset shortage will continue to be deduced, and interest rates will fluctuate downward. Under the logic of asset shortage trading, it is expected that the impact of increased supply will be limited, and long-term interest rates may be biased towards shocks in the short term, especially before and after the initial issuance of treasury bonds, or there may be a slight upward trend before and after the initial issuance, but the medium and long-term may still be difficult to resist the downward force, referring to the interest rate level under the dominant logic of asset shortage in the first two months, the 10-year treasury bond may still hit a low of 2.23% in the future.
(This article is from Yicai)