Bond Market Daily: April 28

Source: Xinhua Finance

Xinhua Finance, Beijing, April 28 (Wang Jing) The bond market continued its upward trend on Monday (April 28). Most of the main contracts of treasury bond futures rose, and the yields of bonds in the inter-bank spot market fluctuated and fell by about 1 basis point (BP); The central bank made a net injection of 103 billion yuan into the open market on a single day. There is basically no worry about liquidity before the end of the month, and the funding rates generally continued to decline.

Institutions believe that with the weakening of fundamentals and the gradual easing of monetary policy, there is still a possibility of a subsequent downward breakthrough in yields. From the perspective of investment strategies, there is still an opportunity to maintain the duration of medium- and long-term bonds, long-term bonds are still dominant, and the yields of long-term bonds are expected to reach new lows.

[Market Tracking]

Most treasury bond futures closed higher. The main contract of 30-year treasury bond futures rose 0.30% to 120.180, the main contract of 10-year treasury bond futures rose 0.03% to 108.840, the main contract of 5-year treasury bond futures fell 0.06% to 105.915, and the main contract of 2-year treasury bond futures rose 0.01% to 102.320.

The yields of major interest rate bonds in the inter-bank market generally declined slightly. The yield of the 10-year China Development Bank bond "25 Guokai 05" decreased by 0.5 BP to 1.709%, and the yield of the 10-year treasury bond "25 Fixed Interest Treasury Bond 04" decreased by 0.85 BP to 1.649%.

The CSI Convertible Bond Index closed down 0.54% at 419.91 points, with a trading volume of 48.23 billion yuan. Among them, Puli Convertible Bonds, Feikai Convertible Bonds, Huaxiang Convertible Bonds, Jingyuan Convertible Bonds, and Yinlun Convertible Bonds were among the top decliners, falling 18.13%, 10.18%, 6.97%, 6.92%, and 5.86% respectively. Huayi Convertible Bonds, Borui Convertible Bonds, Yirui Convertible Bonds, A La Convertible Bonds, and Tianyuan Convertible Bonds were among the top gainers, rising 2.72%, 2.39%, 1.86%, 1.54%, and 1.43% respectively.

[Overseas Bond Markets]

In the North American market, on April 25 local time, the yields of US Treasury bonds fell across the board. The yield of 2-year US Treasury bonds fell 5.94 basis points (BPs) to 3.7377%, the yield of 3-year US Treasury bonds fell 7.02 BPs to 3.7271%, the yield of 5-year US Treasury bonds fell 7.29 BPs to 3.8629%, the yield of 10-year US Treasury bonds fell 7.19 BPs to 4.2372%, and the yield of 30-year US Treasury bonds fell 7.27 BPs to 4.6991%.

In the Asian market, most of the yields of Japanese government bonds fell. The yield of 10-year Japanese government bonds decreased by 1.5 BP to 1.32%, and the yields of 3-year and 5-year Japanese government bonds decreased by 1.1 BP and 0.2 BP respectively, to 0.746% and 0.895%.

In the eurozone market, on April 25 local time, the yield of 10-year French government bonds rose 2.2 BPs to 3.185%, the yield of 10-year German government bonds rose 2.1 BPs to 2.466%, the yield of 10-year Italian government bonds rose 2.8 BPs to 3.571%, and the yield of 10-year Spanish government bonds rose 3.1 BPs to 3.120%. In other markets, the yield of 10-year UK government bonds fell 2.4 BPs to 4.477%.

[Primary Market]

The bidding results of 6 issues of local bonds in Tianjin were announced, and the bidding multiples all exceeded 19 times. Specifically, the winning interest rate of the 7-year "25 Tianjin Bond 22" is 1.80%, the overall multiple is 19.25, and the marginal multiple is 1; the winning interest rate of the 10-year "25 Tianjin Bond 23" is 1.86%, the overall multiple is 19, and the marginal multiple is 3; the winning interest rate of the 5-year "25 Tianjin Bond 24" is 1.59%, the overall multiple is 20.46, and the marginal multiple is 1.35; the winning interest rate of the 10-year "25 Tianjin Bond 25" is 1.83%, the overall multiple is 22.18, and the marginal multiple is 1.67; the winning interest rate of the 5-year "25 Tianjin Bond 26" is 1.59%, the overall multiple is 20.79, and the marginal multiple is 1.07; the winning interest rate of the 10-year "25 Tianjin Bond 27" is 1.85%, the overall multiple is 21.52, and the marginal multiple is 2.

[Funding Situation]

In terms of the open market, the People's Bank of China announced that on April 28, it carried out 279 billion yuan of 7-day reverse repurchase operations through fixed-rate and quantity-based bidding. The operation interest rate was 1.50%, the bidding volume was 279 billion yuan, and the winning volume was 279 billion yuan. The data shows that 176 billion yuan of reverse repurchase matured on the same day. According to this calculation, the net injection on a single day was 103 billion yuan.

In terms of the funding situation, most of the short-term Shibor varieties declined. The overnight variety decreased by 0.3 BP to 1.603%; the 7-day variety increased by 8.2 BPs to 1.723%; the 14-day variety decreased by 0.1 BP to 1.769%; the 1-month variety decreased by 0.1 BP to 1.747%.

[News]

At the press conference held by the State Council Information Office, Zou Lan, Deputy Governor of the People's Bank of China, said that according to the domestic and international economic situation and the operation of the financial market, the reserve requirement ratio and interest rates will be lowered in a timely manner to maintain sufficient liquidity, give full play to the dual functions of the total amount and structure of the monetary policy toolbox, create new structural monetary policy tools, and accurately focus on key areas such as stabilizing employment and promoting growth to provide financial support. It is also studying to enrich the policy toolbox and will introduce incremental policies in a timely manner to help stabilize employment, enterprises, the market, and expectations.

Zou Lan said that according to the domestic and international economic situation and the operation of the financial market, the reserve requirement ratio and interest rates will be lowered in a timely manner to maintain sufficient liquidity, give full play to the dual functions of the total amount and structure of the monetary policy toolbox, create new structural monetary policy tools, and accurately focus on key areas such as stabilizing employment and promoting growth to provide financial support. It is also studying to enrich the policy toolbox and will introduce incremental policies in a timely manner to help stabilize employment, enterprises, the market, and expectations.

The National Development and Reform Commission said that there are still abundant policy reserves and sufficient policy space. It will accelerate the implementation of a number of measures to stabilize employment and the economy, promote the introduction and implementation of various policies as soon as possible, pay more attention to improving the efficiency of policy implementation and the implementation effect, and ensure that the policies reach enterprises and the public directly; At the same time, it will intensify its efforts to ensure the implementation of the established policies, including special actions to boost consumption, making good use of the 5 trillion yuan of investment funds at the national level this year, and accelerating the establishment of the National Venture Capital Guidance Fund. Most of these policies will be implemented in the second quarter; It is confident of achieving the goals and tasks of economic and social development this year.

[Institutional Views]

CITIC Securities: It is observed that the overnight funding rate has declined in an orderly manner, and the 7-day moving average of DR001 has fallen back to 1.65%, a decline of about 30 BPs from the peak. From a longer-term perspective, in order to support the goals of stabilizing growth, easing credit, and expanding domestic demand, the overnight funding rate should generally be slightly lower than the policy interest rate level. In the current international economic context, it is expected that starting from the April PMI, the data level will gradually reflect the pressure, and the time for lowering the reserve requirement ratio and interest rates in a timely manner is approaching. It is more likely that the yield curve will first become bullishly steep and then bullishly flat.

Huatai Fixed Income: The current fundamentals determine that the direction of the bond market is still favorable, and the idea of buying on dips remains unchanged. The information is complex and changeable, and the market trend unfolds rapidly. It is advisable to start from the left side as much as possible. In terms of rhythm, it is expected that interest rates will remain in a narrow range before the end of April, and volatility will increase from May to June, with the possibility of breaking below the previous low. The trigger for breaking the equilibrium may lie in economic data, monetary policy, and the funding situation, but the overall space is limited. In the case of small volatility space and a slightly upward bias, it is suitable to seize the coupon opportunity, and the relative cost-effectiveness of credit bonds is slightly better.

Guosheng Fixed Income said that the bond market may evolve in fluctuations, but it is more likely to break through downward, and long-term bonds are more cost-effective. It is recommended to continue to maintain a duration above neutral. The bond market has continued to fluctuate in the past two weeks. This is because under the superposition of external shocks and the marginal slowdown of domestic demand, the weakening of fundamentals restricts the upward movement of interest rates, but under the passive role of monetary policy coordination, short-term interest rates remain high, restricting the downward space of interest rates. However, looking ahead, monetary easing is the general direction. As the probability of weakening prices increases, the supply pressure of government bonds in the second quarter is relatively close to that in the first quarter.

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