In the second quarter, local bonds may meet the peak of supply, and Penghua fixed income land bond ETF has significant investment advantages

Recently, the sale of local government bonds in the over-the-counter bond market of commercial banks has started the "fight for speed" mode, and the subscription situation is hot. A number of banks in Guangdong Province have started selling 5-year refinancing general bonds of the Guangdong Provincial Government, and some banks have sold out all the quotas within one minute of going online.

The so-called local government bonds are bonds issued by local governments and repaid for them, which are classified according to whether they are used for income projects and the source of repayment funds, including general bonds and special bonds. According to the analysis of industry insiders, in recent years, with the continuous deepening of the "asset shortage" and the continuous expansion of local bonds, the market's attention and participation in local bonds have been increasing.

Local government bonds: the largest source of long-term bonds at present

According to the research report of Minsheng Securities, as of March 31, 2024, the stock of local bonds has exceeded 41 trillion yuan, accounting for more than 43% of the total stock of interest rate bonds, making it the largest variety of interest rate bonds and the largest bond variety in the bond market.

In recent years, with the issuance of new special bonds and refinancing bonds, local bonds have continued to expand, and the proportion of ultra-long-term bond issuance has gradually increased, and the issuance period has been significantly extended. Local government bonds have become the largest source of long-term bonds. In addition, in recent years, in the context of the downward trend of risk-free interest rates, the market's attention to local bonds has increased significantly, investment institutions have become more diversified, and the liquidity of local bonds has improved, and the trading attributes have been enhanced.

Entering the second quarter, the market expects the peak of government bond supply in May ~ June, from the perspective of investment, according to the Minsheng Securities Research Report, since February this year, in the context of the rapid decline in the interest rate of government bonds, the spread between local bonds and government bonds has risen slightly, and the cost performance has appeared. In this context, the market is more concerned about the current investment and trading opportunities of local government bonds.

Why use a bond ETF?

Industry insiders pointed out that the liquidity of local bonds is weak, and investing in local bond ETFs can effectively improve liquidity; Investors can indirectly invest in a "basket" of local bonds by purchasing local bond ETFs to diversify investment risks to a certain extent. Local bond ETFs have the advantages of pledgeable repo transactions, T+0, etc., and have better liquidity than general ETFs. In addition, fund managers disclose the underlying holdings on a daily basis, so that investors can have a clearer understanding of the investment situation.

Further, compared with ordinary pure bond funds, investors can flexibly match the varieties and portfolio duration of their investments through bond ETFs, strengthen active duration management, and choose suitable bond ETFs based on their own risk tolerance. Taking local bond ETFs as an example, there are ETF products with maturities of 0-4 years, 5 years, and 10 years. On the whole, the investment cost performance of local bond ETFs is becoming more and more prominent.

Why pay attention to Penghua Land Bond ETF series?

At present, there are 2 fund companies in the industry that have each launched 2 local bond ETF products. As a "bond index expert", Penghua fixed income "Golden Team" has two land bond ETFs: the first 5-year land bond ETF in the whole market, Penghua 5-year land bond ETF (159972.SZ), and the only 0-4 year land bond ETF in the whole market, Penghua 0-4 year land bond ETF (159816.SZ), which has a good variety and term allocation role, and may be a better tool choice at present, which is worthy of investors' attention.

Penghua 5-Year Land Bond ETF: A Swing Allocation Tool

Founded in August 2019, Penghua 5-year local bond ETF is the first 5-year local bond ETF in the whole market and the first local bond ETF product on the Shenzhen Stock Exchange, and won the "2019 ETF Product Innovation Award" in one fell swoop 930865. CSI), the average remaining maturity of the index is 4.44, and the duration characteristics are suitable for bond bull and volatile markets.

From the perspective of past performance, according to the fund's regular report, as of March 31, 2024, the net value growth rate of Penghua 5-year land bond ETF in the past year, three years and since its inception was 4.89%, 12.74% and 19.18% respectively, and the net value growth rate since the complete natural year of 2021-2023 was 4.91%, 2.96% and 3.92% respectively, and the benchmark rate of return for the same period was 5.27%, 3.50% and 3.84% respectively.

According to the statistics of the long-term performance list of Galaxy Securities Public Fund, as of March 31, 2024, Penghua 5-year land bond ETF has ranked 4/12 and 5/17 respectively among bond ETF funds in the past three years and one year with a high net value growth rate.

In terms of drawdown control, Penghua 5-year land bond ETF is also better than similar products, according to Wind data, its annual drawdowns from 2021 to 2023 are -0.43%, -0.65%, and -0.54%, respectively, and the average of the same category are -0.48%, -0.80%, and -0.55%, respectively.

Penghua 0-4 Year Land Bond ETF: Currency Enhancement Instrument

Founded in July 2020, Penghua 0-4 Year Local Bond ETF is the only 0-4 year local bond ETF in the whole market, and has won the "2020 Shenzhen Stock Exchange ETF Product Innovation Award 931161". CSI), the average remaining maturity of the index is 1.87, and the index has a solid performance with low volatility and small drawdown from historical performance.

Penghua 0-4 Year Land Bond ETF has also had a solid track record. According to the fund's regular report, as of March 31, 2024, the fund's net value growth rate in the past year, three years, and since its inception was 3.80%, 9.75%, and 11.33%, respectively, and the net value growth rate from 2021 to 2023 was 3.44%, 2.55%, and 3.09%, respectively, and the benchmark rate of return for the same period was 3.61%, 2.79%, and 2.91%, respectively.

In addition, the annual drawdowns of Penghua's 0-4 year land bond ETF2021-2023 are -0.14%, -0.30%, and -0.22% respectively.

It is worth mentioning that the above two Penghua land bond ETF products also have the characteristics of pledge (which has been included in the pledged repurchase target of the Shenzhen Stock Exchange), low fee rate (management fee rate of 0.15%, custody fee rate of 0.05%), convenient transaction (can be applied for and redeemed at the first level and bought and sold at the second level), etc., and have distinctive tool attributes, which are not only suitable for individual investors as a tool to flexibly grasp the investment opportunities of local bonds, but also to meet the needs of institutional investors for long-term allocation.