After continuous adjustment, the bond market has warmed up in the past two days. First, on March 4, treasury bond futures closed up across the board, and the yields of major inter-bank interest rate bonds generally fell; By March 7, cash bonds and futures continued to strengthen, and the main five-year contracts increased significantly, at 0.16%. The yield trend of main interest rate bonds among banks was differentiated.
The consensus in the industry is that the current market is still in the stage of accumulating the effect of the “wide credit” policy, and the effect of policy implementation remains to be observed, so the short-term bond market will continue to fluctuate. At present, the key factors affecting the bond market lie in two aspects: on the one hand, whether the stable growth and stable credit can be realized smoothly; On the other hand, the expectations of various policies are poor. It is also mentioned that the recent rise in inflation has become another variable in the bad bond market.
Looking ahead, Citic Securities Company Limited(600030) co chief economist Mingming told reporters that considering that this year’s economic policy is intended to stabilize growth rather than strong stimulus, under the policy of stable and forward fiscal aggregate, it is expected that the first half of the year will be the time when the economic momentum will be the most concentrated. The growth momentum or slowdown in the second half of the year may have more short-term impact on the bond market.
after continuous correction, the bond market recovered
Due to the frequent negative signals, the bond market experienced rapid adjustment at the end of February and early March, and fell into a pattern of weak shocks. However, recently, the situation seems to have improved and warmed up for two consecutive trading days.
Specifically, on March 4, treasury bond futures closed up across the board, with 10-year main contracts up 0.16%, 5-year main contracts up 0.13% and 2-year main contracts up 0.01%; In terms of cash bonds, the yield of inter-bank main interest rate bonds generally fell by about 2bp. As of 16:45 on the same day, the yield of 10-year CDB active bonds fell by 1.6bp to 3.1140%, and the yield of 10-year Treasury bonds fell by 1.73bp to 2.8225%; The yield of 5-year National Development Bank active bonds decreased by 2.5bp, and that of 5-year treasury bonds decreased by 2.25bp.
On March 7, cash bonds and futures were weak first and then strong. Treasury bond futures rebounded in the afternoon and closed up slightly. The 10-year main contract rose 0.11%, the 5-year main contract rose 0.16% and the 2-year main contract rose 0.08%; As of 17:30 on the same day, the yield of 10-year CDB active bonds rose by 0.55bp and the yield of 5-year CDB active bonds fell by 1.99bp; The yield of active bonds of 10-year Treasury bonds increased by 0.27bp, and the yield of active bonds of 5-year treasury bonds decreased by 1.75bp.
A senior practitioner of the bond market told China first finance and economics that after the early bad factors were gradually digested, the recent recovery of the bond market was not unexpected, but on the whole, the institutional mood was still cautious and difficult to be optimistic.
Looking back on this round of bond market adjustment, first, after the interest rate cut in January, the internal and external constraints faced by the central bank have increased. The market generally believes that monetary policy may enter a period of empty window. Under this background, the bond market fell into shock; Then, in January, the new RMB loans and the scale of social finance both hit record highs and exceeded market expectations, which became the fuse to trigger this round of bond adjustment.
Subsequently, since the middle and late February, many cities across the country have reduced the down payment ratio of house purchase and mortgage interest rate. The improvement of market expectations for “wide credit” continues to impact the sentiment of China’s bond market. “The real estate relaxation triggered a rise in the expectation of wide credit, and the bond market fell below the support level. With the release of real estate relaxation policies in many places, the marginal concern about wide credit in the bond market further increased.” Qin Han, Guotai Junan Securities Co.Ltd(601211) chief fixed income analyst, analyzed at that time.
In March, the National Bureau of statistics released the manufacturing PMI in February, which rebounded to 50.2%, better than market expectations. Affected by this, the bond market fluctuated again. According to the analysis of Zhonghui Futures Research Report, the improvement of the economic boom in February exceeded market expectations, which means that the effect of the early steady growth policy gradually appeared, and the economy began to show signs of recovery. In March, more steady growth statements and measures may be issued in the national “two sessions”, and the sound margin of the bond market based on broad credit bearish was strengthened.
In addition, there are views that inflation has become a new variable in the bearish bond market. On the one hand, when testifying in Congress on the semi annual monetary policy report, US Federal Reserve Chairman Powell said that he supported raising interest rates by 25 basis points in March to start the interest rate hike cycle. At the same time, he was open to raising interest rates more sharply in the case of overheated inflation. He would start to reduce his balance sheet after the first interest rate hike, but the plan of reducing interest rates would not be determined at this meeting. The interest rate difference between China and the United States rose slightly to about 100.
On the other hand, the recent global financial market shock and multi factor resonance have led to the continuous sharp rise of international oil prices, followed by the rise of China’s commodity prices. China’s crude oil futures prices have risen by more than 17% in the past week. “High inflation challenges the central banks of various countries, the market’s loose expectations for China are weakened, and the news of real estate relaxation in some cities is constantly superimposed, which all add to the worries of bond trading sentiment.” Zhonghui futures research report said.
Sealand Securities Co.Ltd(000750) also said that after the current round of oil prices broke 100, the short-term or volatility of the bond market intensified. At present, “the market has strong concerns about stagflation, which has suppressed risk appetite to a certain extent. The subsequent market rebound needs to wait for the stagflation concerns to be significantly alleviated. After the current round of oil prices broke 100, it has a certain driving effect on the commodity market, and the short-term or volatility of the bond market has intensified.”
future strength is still possible
Although the volatility of the bond market increases in the short term, in the long run, many people in the industry believe that the bond market is still possible to strengthen. The last month or two will be an important observation window period for the economic situation and monetary policy.
This year’s government work report puts forward that the GDP growth target is about 5.5%. At the same time, this year, we will strive to stabilize the macro-economic market and keep the economic operation within a reasonable range. We will strengthen the implementation of prudent monetary policy. Give full play to the dual functions of monetary policy tools in terms of aggregate and structure, and provide stronger support for the real economy. Expand the scale of new loans, keep the growth rate of money supply and social financing basically match the nominal economic growth, and keep the macro leverage basically stable. Keep the RMB exchange rate basically stable at a reasonable and balanced level.
according to the analysis of Orient Securities Company Limited(600958) Research Report, due to the slightly higher target of stable growth and the continuous force of fiscal and real estate policies, the bond market is temporarily weak. However, if the economic and credit data are less than expected, the structure is poor, or the central bank further releases positive signals, the pessimism of the bond market will change, and the trading market can pay attention to the band operation opportunities brought by the oversold rebound of the bond market.
“In the long run, the upward direction of interest rates can be basically determined. The ultimate goal of broad money is to stabilize credit, and the goal of steady growth will eventually be achieved. After the stabilization and recovery of economic growth is confirmed, the debt bear will also come.” Orient Securities Company Limited(600958) research team said.
Mingming also said that this government work report further confirmed the determination to stabilize growth. With the passage of the data vacuum period, it is expected that more macro data will be disclosed to verify the quarterly improvement of the economy and the gradual boost of market risk appetite.
This means that for the bond market, under the environment of loose monetary policy and gradual verification of wide credit, the fluctuation will be amplified. Mingming expects that the 1-year MLF (medium-term lending facility) interest rate of 2.85% is the phased top of the 10-year Treasury bond interest rate. There are trading opportunities for moderate participation in the current interest rate level. In the future, we need to continue to pay attention to the effect and sustainability of steady growth.
However, Mingming also mentioned that previously, the bond market had strong expectations for the power space of the follow-up fiscal policy, and the fiscal policy in this government work report did not choose to increase the deficit ratio, but ensured the intensity of fiscal expenditure through carry over balance and transfer in funds, reflecting a certain policy determination. Under the policy of stable and forward fiscal aggregate, it is expected that the first half of the year will be the time when the economic momentum will be the most concentrated. The growth momentum or slowdown in the second half of the year may be the logic of short space and long space for the bond market.
