The central bank takes action! Treasury bond futures fell in response, and bond market funds may flow back to the stock market

Southern Metropolis Daily

2024-07-01 18:54Southern Metropolis Daily official account

The full text is 1656 words, and it takes about 5 minutes to read, so help me mark the key points

Highlight the point

01The People's Bank of China announced that it would recently carry out treasury bond borrowing operations for some primary dealers in open market business, resulting in a plunge in treasury bond futures across the board.

02 Since borrowing treasury bonds has a certain cost and needs to be repaid at maturity, the market usually believes that the bond borrower is essentially the bond bear.

03 Since the beginning of this year, the bond market has continued to be bullish, and the scale of fixed-income wealth management products has grown rapidly, while A-shares have performed weakly under the "seesaw" effect of stocks and bonds.

04 On the other hand, the current valuation of stock and bond spreads has been at a historical low, and the stock market is increasingly attractive to bonds.

05 industry analysts believe that the central bank will gradually incorporate the secondary market treasury bond trading into the monetary policy toolbox, and if the bond market is approached to a "reasonable range" in the future, some funds may choose to return to the stock market.

Technical support is provided by Tencent Hybrid Model

On July 1, the official website of the People's Bank of China issued an announcement that in order to maintain the stable operation of the bond market, on the basis of prudent observation and assessment of the current market situation, the People's Bank of China decided to carry out treasury bond borrowing operations for some primary dealers in the open market in the near future.

Affected by this news, treasury bond futures dived across the board on the day, and the major A-share indexes accelerated their intraday recovery. Since there is a cost to borrowing Treasury bonds and they need to be repaid at maturity, the market generally considers bond borrowers to be bond bears in nature.

The reporter of Nandu Bay Finance Society noticed that since the beginning of this year, the bond market has continued to bullish, and the scale of fixed-income wealth management products has grown rapidly, while A-shares have performed weakly under the "stock-bond seesaw" effect. According to some analysts, the central bank has gradually incorporated the trading of treasury bonds in the secondary market into the monetary policy toolbox, and if it is implemented in the future, it may drive the bond market to move closer to a "reasonable range". On the other hand, the valuation of equity and bond spreads is already at historically low levels, and the equity market is becoming more attractive to bonds.

The central bank may reduce its holdings of government bonds to guide yields upward

The subsequent bond market may fluctuate in a certain range

Affected by the news of the central bank's borrowing of treasury bonds, treasury bond futures dived across the board on the same day. As of the close, the main 30-year treasury bond futures contract fell 1.06% to 108.44 yuan, and the main 10-year treasury bond futures contract fell 0.37% to 104.975 yuan.

Yields on major interbank interest rate bonds mostly climbed. As of press time, the yield on the 10-year Treasury active bond rose by 3.95 basis points, and the yield on the 30-year Treasury bond rose by 5.15 basis points.

Since April this year, the central bank has repeatedly warned of the interest rate risk of long-term bonds. On April 3, the central bank first mentioned at the regular meeting of the Commodity Administration Committee in the first quarter of 2024 that "in the process of economic recovery, we should also pay attention to changes in long-term yields". According to the statistics of the fixed income team of Soochow Securities, since April, the central bank has "shouted" more than 8 times for long-term interest rate risks.

The bond market has continued to be hot, and long-term bond futures have hit new highs. On April 23, due to the central bank's risk warning on long-term interest rates, 10-year and 30-year treasury bond futures peaked in stages and began to adjust in the past two months, but hit a record high on June 18.

Source: Soochow Securities

The CITIC fixed income team believes that in the near term, driven by the expected increase in monetary easing, the slow development of broad fiscal force, the seesaw effect of stocks and bonds, institutional behavior, and the possible early response to the seasonal characteristics of the second half of the year, the bond market interest rate has shown a rapid downward trend and reached the previous low, further pushing up the bond market.

Guide the interest rate of long-term bonds to match the long-term economic growth expectations, and the central bank may borrow treasury bonds to sell.

On April 23, the relevant person in charge of the central bank said in an interview with the Financial Times that "long-term government bond yields will operate within a reasonable range that matches long-term economic growth expectations"; On 17 May, the Financial Times spoke out again, stating that "2.5% to 3% could be a reasonable range for long-term Treasury yields".

As of press time, the yield of the 10-year treasury bond active bond is 2.2675 and the yield of the 30-year treasury bond is 2.4675, both of which are lower than 2.5%. On May 30, the Financial Times again published an article saying that "long-term government bond risks should be taken seriously, and 2.5%-3% is the yield of 10-year government bonds and a reasonable range", and mentioned the possibility of the central bank selling government bonds at the right time.

Pan Gongsheng, governor of the People's Bank of China, said at the Lujiazui Forum a few days ago that the trading of government bonds in the secondary market will be gradually included in the monetary policy toolbox, positioning it as a base currency delivery channel and liquidity management tool, both buying and selling, and combining with other tools to jointly create a suitable liquidity environment.

The bond market version of "refinancing". The central bank borrowed treasury bonds from primary dealers in the open market and sold them in the secondary market, which industry insiders said was equivalent to the bond market version of "refinancing". In the short term, this will increase the supply of long-term and ultra-long-term treasury bonds in the secondary market, and push the price of long-term ultra-long-term treasury bonds in the secondary market to fall and the yield to rise.

Some market analysts believe that since borrowing treasury bonds has a certain cost and needs to be repaid at maturity, for the borrower of treasury bonds, only when the price of treasury bonds falls, the borrower will generate profits. As a result, the market generally assumes that bond borrowers are essentially bond bears.

The fixed income team of Shanxi Securities believes that considering the reasonable range of the 10-year treasury bond yield given by the central bank, the follow-up bond market may fluctuate in a certain range, and the downside of medium and long-term interest rates is narrowing.

The odds of ultra-long bond investment may be small

Funds in the bond market may flow back to the stock market

In the first half of the year, as the bond market continued to grow, the scale of fixed-income wealth management products grew rapidly. According to Puyi Standard data, as of May 19, among the 2.89 trillion wealth management scale that has increased since the end of March, fixed income wealth management has increased by 2 trillion yuan, becoming the main increment of wealth management products this year.

Under the "seesaw effect of stocks and bonds", the stock market has performed weakly this year. Since the beginning of this year, as of July 1, the Shanghai Composite Index has risen 0.67%, and the ChiNext Index has fallen 11%; Of the more than 5,000 A-share listed companies, only 837 have recorded an increase in their share prices this year.

Zheng Zixun, an analyst at Haitong Securities, believes that the central bank will gradually incorporate the trading of treasury bonds in the secondary market into the monetary policy toolbox, and if it lands in the future, it may drive the bond market to move closer to a "reasonable range". Compared with the low point on April 23, the odds space for ultra-long bonds may be small from the perspective of the concentration of active bond lending and the position of ultra-long bonds of the fund, unless the deposit/OMO interest rate adjustment opens the space.

On July 1, the bond market weakened, the bullish sentiment of the stock market was released, and the recovery of A-shares accelerated in the afternoon. In particular, the ChiNext index fell nearly 2% in early trading, and the decline narrowed to 0.04% by the end of the day.

According to the analysis of industry insiders, the "spring" of stock and bond cost performance has been continuously compressed in the past two years, and the current valuation of stock and bond spreads has been at a historical low, and the attractiveness of the stock market relative to bonds has been continuously improved. In the case that the central bank wants to "maintain a normal upward slope yield curve", the bond market may face a correction, and some funds may choose to return to the stock market.

 Written by: Huang Shunwei, trainee reporter of Nandu Bay Finance Society

View original image 50K

• 

• 

• 

• 

•