This year's bond market** is divided into three phases:
Phase 1 (January 5, 2023 – August 24, 2023): The economic recovery is worse than expected, and the futures bond opens low and moves high. Although the official manufacturing PMI re-stood above the boom and bust line in January and February, the rebound came to an abrupt end after only two months, and fell below the boom and bust line again in the second quarter, showing the characteristics of an unstable foundation for recovery, which led to the rekindling of market bullish confidence and pushed the futures bond into a unilateral upward pattern. During the period, the signal of monetary easing was clearer, the central bank cut the reserve requirement ratio and interest rates twice, and on August 15, the MLF interest rate was cut more than expected to further promote the maturity of bonds, but it also accelerated the arrival of the timing of the adjustment of future bonds.
Phase 2 (August 25, 2023 – October 19, 2023): Super-seasonal tightening of liquidity, adjustment of futures bonds. Although the RRR and interest rate cuts have landed, the market has once again staged the plot of "good cash is negative, and interest rate cuts are tight funds". Since late August, the easing that the market was expecting has not arrived, and the funding rate has risen at a higher slope than the same period last year, putting some pressure on the bond market. At the same time, the intensive introduction of real estate relaxation policies, the larger-than-expected issuance of special refinancing bonds, and the implementation of the trillion-dollar treasury bond issuance plan continued to increase the market pessimism during the period.
Phase 3 (October 20, 2023 to present): The pressure on bond supply has weakened marginally, and the important meeting has not released a strong stimulus signal as expected, and the futures bond has rebounded again. Special refinancing bonds were issued in October, the supply pressure of ** bonds in November was significantly reduced, and the additional issuance plan of trillion treasury bonds in the fourth quarter has been fully expected. Against the backdrop of intensive bullish factors, the market temporarily ignored the phenomenon of inversion of the interbank certificate of deposit interest rate and the MLF interest rate, and chose to trade monetary easing expectations. With the reduction of deposit interest rates by a number of commercial banks on December 22, the expectation of monetary easing has been verified, further promoting the upward movement of futures bonds.
Overall, this year's bond market has continued to be bullish, and the increase has further expanded compared with 2022, although it has been disturbed by factors such as bond supply pressure, regulators' intention to curb capital idling, and unexpected tightness of funds, but the weak economic recovery has laid a foundation for risk-free bond bulls, so that the bullish trend will be maintained until the end of the year. However, as the funding rate pivot as a whole has risen compared with last year, this has led to the continuous compression of term spreads, and the performance of long-term contracts has been relatively stronger, especially the performance of newly listed TLs. The phenomenon of the continuous rise of treasury bonds and the continuous expansion of turnover exposes the consistency of the institution's risk-off behavior at the end of the year, the scarcity of risk assets, the short-term ** or a flash in the pan in terms of commodities, it is wise to short-sell relatively weak commodities with the trend, and be cautious of the highest commodities, especially the black series, to protect the money bag.
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