Feng Shui takes turns", the A-share and bond markets show a festive **.
On February 27, the national debt *** continued**. The sharp reduction in LPR over 5 years directly led to lower yields on Treasury bonds, of which the yield on 10-year Treasury bonds fell below 24%, the lowest since May 2002.
*: Investing.com.
The reduction in the yield of long-term treasury bonds has improved the cost performance of bond investment, and the bank's follow-up reduction of deposit interest rates and other factors have been superimposed, so that the upward trend of futures bonds has been well reflected.
The bond market is back in the red eye
An important premise for the strength of the bond market is caused by the relatively loose capital side of the market.
Looking back on 2023, capital liquidity has gone through four stages: from loose to tight, loose, tight again, and back to loose.
Before and after the Spring Festival, the market capital has been in a stable and loose state. This can be seen from the central bank's reverse repo action.
On February 23, the central bank carried out a reverse repurchase operation of 247 billion yuan under the volume of 92 billion yuan of 14-day reverse repurchase expiration, and the open market achieved a net investment of 155 billion yuan.
Shanghai ** Daily quoted the views of the Zhongtai ** fixed income team and pointed out that the post-holiday capital is neutral. The favorable factor is that the liquidity released by the central bank's RRR cut can effectively supplement the funding gap, and the overall decline in the volatility of the capital side in recent years will be superimposed, and the center and volatility of funds after the holiday may remain at a relatively low position.
In addition, the current credit demand has not been fully repaired, and there is a need to maintain stability in the capital market, so the central bank's attitude towards caring for liquidity will not change in the short term, and the risk of a significant tightening of the capital side is limited.
In addition to the funding side, the unexpected reduction in the LPR rate is also a catalyst. After the Spring Festival, on February 20, the central bank authorized the National Interbank Funding Center to announce the latest loan market ** interest rate (LPR): 1-year LPR is 345%, unchanged; LPR for more than 5 years is 395%, down 25 basis points from the previous value, of which the decline in the 5-year LPR has completely exceeded market expectations.
Additional funds are on the way
Amid the pressure on net interest margins, banks have cut deposit rates several times since last year.
According to the main regulatory indicators of commercial banks in the fourth quarter of 2023 disclosed by the State Administration of Financial Supervision and Administration, in 2023, the net interest margin, one of the important indicators to measure the profitability of commercial banks, is still declining as a whole, and the net interest margin in the fourth quarter decreased by 4 basis points quarter-on-quarter to 169%, down below 17%, the lowest since statistics began in 2010.
According to the analysis of Everbright's financial industry research team, the pressure points mainly come from three aspects: first, the impact of the reduction in the interest rate of the existing first home loan appeared in the fourth quarter; Second, in December last year, the interest rate of new public loans and personal housing loans fell much higher than the decline of LPR, while some existing loans still faced greater rolling repricing pressure; Third, in the process of urban investment bonds, the banking system may face a centralized "interest rate reduction and extension" arrangement, which may have a partial impact in the fourth quarter of last year.
In the context of a series of pressures and the decline in LPR interest rates, since the beginning of the year, in order to continue to maintain interest margins, many banks have lowered deposit rates again.
According to the financial industry, from the beginning of 2020 to January 2024, Chinese households will net 5824 trillion yuan, and 82% of them are fixed deposits.
After calculation, Xingye ** found,The super-trend growth of residents' deposits comes from the change in the use of deposits, not simply because of less consumption. As of the third quarter of 2023, the decline in home purchases in the residential sector increased by 57 trillion yuan of deposits, less buy wealth management increased by 45 trillion yuan in deposits.
Of course, behind these behaviors is also a reflection of the uncertainty of the general environment. Over the past few decades, despite negative deposit rates in Japan, residents have been happy to put their money in their savings boxes.
Last year, due to the consideration of risk assets, bond market interest rates, and stable returns, many bank wealth management products continued to increase the allocation of cash and bank deposit products, and were not enthusiastic about the allocation of bond assets.
2023 is the second year of the implementation of the new asset management regulations, and it stands to reason that bank wealth management has fully entered a new stage of net-worth development.
However, on the one hand, out of the inertia of purchasing prudent financial management, customers always favor principal-protected products; On the other hand, during the transition period, bank wealth management managers have not yet cultivated excellent risk asset management capabilities, resulting in the growth of bank wealth management scale once overtaken by public offerings.
In order to improve the scale of bank wealth management, on the one hand, many banks have started self-purchase, reduce the management fee rate of wealth management products, etc. On the other hand, the bank's wealth management subsidiaries have also begun to launch new product concepts, such as change portfolio wealth management similar to Yu'e Bao, long-term closed-end wealth management, etc. as drainage artifacts.
In 2023, the main "stable and low-wave" products will be very popular. According to the China ** newspaper, the balance of cash and bank deposits allocated by bank wealth management increased by 2 in a year5 trillion yuan, while the balance of bonds, non-standardized creditor's rights assets, and equity assets all declined by different margins.
There is no unified statement in the industry on stable and low volatility, but it mainly allocates cash, interbank certificates of deposit, bank deposits and other targets with the lowest risk level.
The 2023 Annual Report of China's Banking Wealth Management Market also shows that as of 2023, the allocation ratio of wealth management products to cash and bank deposits is 23 compared with 23 in the first half of the year7% increased by 3 percentage points to 267%, the highest peak in history, compared to 905%, an increase of nearly 2 times.
Conclusion
With the performance of the bond market rising, many institutions believe that banks' allocation to bond-like assets may increase.
In an interview, the chief fixed income analyst of Guosheng ** Research Institute pointed out that it is expected that the credit growth rate of banks will slow down this year, and the proportion of bank debt allocation will increase.
Liu Yu, chief analyst of GF** fixed income, pointed out that from the first main line, the interpretation of this year's bond market may mean that all long-term interest rate adjustments are opportunities for allocation. However, the current long-term interest rate has fallen to a critical point, and the continuation of ** needs to be driven by new pricing logic, and the current uncertainty lies in the strength and rhythm of short-term fiscal force.
Clause. Second, the impact of the three articles on the bond market may be that the short-end fund interest rate is limited, but the scale of wealth management may continue to expand, and the allocation power of short-end varieties will appear. Third, on the whole, the configuration can choose the long end, and the transaction considers the short end.
In terms of institutional behavior, after the Spring Festival, the allocation sentiment is high, and all kinds of bonds are increasing their holdings.
Disclaimer] The content of the article is for research and study purposes only and does not constitute any investment advice. Investment is risky and past performance is not indicative of future performance.