The "deposit move" intensified, and long-term interest rates bucked the trend

China Times

2024-05-30 15:18 Published on the official account of Beijing China Times

Ran Xuedong

The 30-year Treasury yield has seen a sharp downward trend recently, from a peak of 2.62% on May 11 to 2.5580% on May 30, almost half a month. This downward trend in long-term interest rates has been accompanied by the issuance of 50- and 30-year ultra-long-term special Treasury bonds, and the outlook for inflation in the coming months does not support a sustained decline in interest rates.

The regulator's attitude does not support the decline in long-term interest rates, and judging by their statements, the yield on 30-year Treasury bonds should remain at 2.5% to 3%. On April 23, the relevant person in charge of the central bank said in an interview with the media that the yield of long-term government bonds will generally operate within a reasonable range that matches long-term economic growth expectations. At the end of April, the yield on 30-year Treasury bonds had risen to more than 2.5%, and the relationship between supply and demand in the bond market had improved marginally.

As for the reason for the continuous rise in long-term treasury bond yields since the beginning of this year, the regulator believes that it is mainly a problem of capital. The central bank opened a special column on the issue of long-term yields in the first quarter of this year's monetary policy implementation report, saying that the lack of safe assets in the market has had an impact on long-term treasury bond yields.

In the first quarter, banks, insurance and other institutions released the demand for asset allocation in a concentrated manner out of the consideration of "early purchase and early return", and the demand for risk-free assets of investors was also rising, and the demand for investment in the bond market increased accordingly. As of the end of March, the scale of open-end public bond funds was 5.7 trillion yuan, an increase of 36.3% over the same period last year. In particular, some institutions have extended their investment duration in order to increase the investment income of bonds, and the demand for long-term bonds has increased. In the first quarter, the transaction volume of 20-30-year bonds in the interbank bond market was 8.9 trillion yuan, a year-on-year increase of about five times, of which the transaction scale of rural financial institutions accounted for 24.8% of the interbank bond market, an increase of about 10.5 percentage points over the same period last year.

From the current point of view, the shift in deposits has exacerbated this downward trend in terms of financial support for bond yields.

In 2023, state-owned banks lowered deposit rates several times, and since 2024, small and medium-sized banks have also lowered deposit rates. In addition, on 8 April 2024, the Self-Regulatory Mechanism for Market Interest Rate Pricing issued the Initiative on Prohibiting the Cultivation of Deposit Market Competition Order through Manual Interest Replenishment and High Interest Solicitation, which clearly requires banks not to promise or pay supplementary interest to customers in any form that exceeds the authorized upper limit of the deposit interest rate.

At this time, the rate of return of bank wealth management, money market funds, insurance products, etc. has obvious advantages, and money market funds also have the characteristics of flexible application and redemption. In this context, the deposits of some residents and enterprises have been converted into investment in financial products, which has exacerbated the rise in the bond market and lowered yields.

As of April 30, the scale of bank wealth management products was 28.42 trillion yuan, an increase of 2.34 trillion yuan from the previous month.

As of the end of April, compared with the end of last year, the scale of money market funds increased by 2.16 trillion yuan, far exceeding other varieties, in addition, bond funds increased by 826.188 billion yuan, and hybrid funds shrank relatively by 233.959 billion yuan.

The total scale of currency funds and bond funds reached 19.57 trillion yuan, accounting for nearly two-thirds of the total scale of public funds.

However, from the perspective of inflation, the expectation of prices in the future, at least in the short term, is rising, and does not support the decline of market yields. The factor that has the greatest impact on the price rise on the mainland is pork, and the price of pork has risen significantly. According to Yongyi Consulting, on May 26, the average sales price of three-yuan live pigs outside the country was 16.77 yuan/kg, up 0.96 yuan/kg week-on-week, an increase of 6.1%. In the past two weeks, the price of live pigs has risen by more than 1.5 yuan/kg.

Since February, the South China Industrial Products Index has continued to increase year-on-year, and the increase in May expanded to 19.4%. Among them, the largest increase was in metals, energy and chemicals, and the year-on-year increase in May was further widened; The revenue growth rate of metal, petrochemical processing and other industries has also improved, pointing to the demand side support for the recent recovery of industrial product prices.

Non-ferrous metals are the most eye-catching species this year, gold took the lead in starting, silver followed, at present, silver prices for the first time in more than a decade to break through the important $30 per ounce mark to more than $32. Against the backdrop of strong financial and industrial demand, silver rallied more rapidly than gold, overtaking it to become one of the best-performing major commodities of the year.

"Dr. Copper" has been continuously short-forcing the market this year, and the rise of aluminum has been fierce, and since then, the rebound in iron ore prices has led to the rise of the black index. In May, the South China Nonferrous Metals Index expanded its rise to 16.9%; The South China Black Index rose to 14.7% year-on-year, of which the weight of iron ore was as high as 40%, and the price rebounded significantly since April, which was the main reason for the rise of the black index.

Recently, Gao Shanwen, chief economist of SDIC Securities, believes that the decline in China's long-term marginal capital return has led to the downward trend of long-term interest rates, which is the most important background at present, based on which it can be expected that the 10-year treasury bond interest rate will continue to decline in the next ten years and will fall to around 2%. However, judging from the inflation situation, it does not support his view in the short term.

Editor-in-charge: Meng Junlian Editor-in-chief: Zhang Zhiwei

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