Steady as the Word, Waiting for the Inflection Point
- Annual Investment Strategy of Interest Rate Bonds in 2021
(Haitong Fixed Income: Jiang Peisan, Sun Liping)
Summary
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1. The bond market is heading towards a bearish flat, with interest rate bears and credit bulls
1.1 20 Year bond market: epidemic + policy is the main line
January to April. Influenced by the new crown epidemic, domestic and international easing continues, the bond bull market opened.
The bond market continued to fall from the end of April to the first half of July. the end of April at home and abroad to resume work is expected to lift risk appetite, the central bank continued to pause the injection to lift the funds pivot, the supply shock in May, the funds continued to tighten in the first half of July, the stock market soared to bring the stock and bond see-saw effect. the stock market soared in the second half of July ended, the funds tightened and balanced, the bond market stepped into the shock.
In August, the low over-reserve rate, tax payment factors lead to tight funding, funds rate pivot continued to rise, coupled with the monetary policy to maintain neutral, the economic recovery continues, the social financing steady and slightly rising, the bond market bear flat market.
In September, the central bank to increase capital investment, structural deposits pressure to slow down the pressure, interest rate bond supply fall, the end of the quarter, fiscal spending accelerated, as well as China's treasury bonds will be included in the WGBI index, such as favorable bond market sentiment, but the economy is steadily recovering, the social financing of the big more than expected, the first time consumption growth rate turned positive, the bond market bear continuation, the shock fell.
Since October, more favorable fundamentals, the strength of the economic recovery slowed down, superimposed on the supply of interest rate bonds continue to fall, but by the impact of tax payments, the bond market fell to usher in a small warming market after the continuation of the bear market shock market.
In the first half of November, the bond market supply fell back, the supply and demand pattern continues to improve, the monetary policy to maintain stability, it is difficult to tighten in the short term, superimposed on the year tax payment big month are over, year-end fiscal expenditure is expected to accelerate, the funding side of the favorable factors increased. 11 since the middle (as of November 20), the super-expected credit risk fermentation (November 10th permanent coal default), the bond market fell sharply.
1.2 20 Year bond market: from bulls steep to bears flat
This year, the central bank lowered the MLF interest rate (1 year), reverse repurchase interest rate (7 days) each twice, the short-end interest rates sharply down to achieve the 10-1Y Treasury term spreads. In mid-May, the maximum expansion to 147BP, the largest value since August 2015.
Since April 30th, the bulls have switched from steep to flat bears, and as of November 24th, the term spread has narrowed 107BP to 32BP, hitting a nearly one-year low.
1.3 Bond market divergence: Since May interest rate bears but credit bulls
So far this year, the credit bond and treasury bond indices have returned 2.8%, 1.4% respectively (as of November 24, annualized, the same below); since the opening of the bear market in May, the bond market divergence intensified, as of November 9, the credit bond index return of 0.4%, treasury bond index return of -6.8%; since the November 10 Yong coal default, credit bonds, interest rate bonds fell sharply, the index return of -9.4%, -4.6% respectively.
2. Government debt or slow decline, social financing inflection point is approaching
2.1 Social financing growth rate next year from the central bank's target
19 years since the monetary policy intermediary targets have shifted to basically matching M2 and social finance growth to nominal GDP growth. We believe that 2021 is still in the stage of stabilizing leverage, so the social financing - nominal GDP growth rate difference should be higher than 1.3% (17 years, 18 years of social financing - nominal GDP growth rate difference in the average), and then combined with the 19 years of data, social financing - nominal GDP growth rate difference of about 2.6% or the central bank's agreed range, if the nominal GDP growth rate in 2021 is measured at about 10%, the corresponding social financing growth rate is 12.6% or so.
Expected 2021 The target deficit rate in 2021 will be difficult to adjust upward significantly. According to the law of changes in GDP and the target deficit rate, and considering that there is still room for the government to increase leverage, it will be difficult to adjust the deficit rate and the size of the special debt downward significantly next year. In addition, we expect that next year's active fiscal policy will be from 2020, "more active" to "focus on effectiveness" or "improve quality and efficiency", taking into account the special circumstances of this year.
2.2 Government bonds or a small decline, social financing high point or at the beginning of the year
We discussed the size of next year's government bond deficit in three scenarios, and we expect that optimistic and neutral assumptions probability of a little more, corresponding to the net financing of the government bonds compared to the 20-year reduction of 7,000 ~ 800 billion yuan and 13,000 million yuan, respectively. 800 billion yuan and 1.3 trillion yuan:
a) Optimistic scenario: the deficit rate stays flat at 3.6%, the special debt stays flat at 3.75 trillion yuan, and the net financing of government bonds is 7.6 trillion yuan, 7,000 to 800 billion yuan less than in 20 years;
b) Neutral scenario: the deficit rate is adjusted downward to 3.3%, and the special debt is adjusted downward to 3.5 trillion yuan, and the net financing of government bonds is 7.1 trillion yuan, a decrease of 1.3 trillion yuan from 20 years;
c) pessimistic assumptions: the deficit rate is adjusted downward to 3.0%, the special debt is adjusted downward to 3.3 trillion, and the net financing of government bonds is 6.5 trillion yuan, a decrease of 1.9 trillion yuan from 20 years.
Credit growth is expected to decline next year. Next year's real estate and infrastructure loan growth or weakened, the main support for credit next year is expected to come from the residents and the manufacturing industry's medium- and long-term loans, the former benefited from the decline in residential mortgage rates, the latter benefited from the recovery of the inventory cycle, we expect the new credit 19.6 trillion yuan in 2021, the annual credit growth rate fell to about 11.5%.
Social finance growth next year may be around 12% , with the high point or at the beginning of the year. As of November 26, 2020, the Ministry of Finance still has not issued the 2021 new local debt advance approval limit, which may be related to the recent Ministry of Finance issued a letter, we believe that the 2021 government debt issuance rhythm or smooth, so we are based on the rhythm of the government debt issuance (smooth or 19 years of the rhythm) + next year's government bond financing scale (optimistic or neutral assumptions) after the two by two combinations Scenario discussion: the results show that the end of next year's social financing growth rate or between 11.8% to 12%, the monthly social financing growth rate of the high point or at the beginning of next year, for 13.9% to 14% or so.
2.3 Social financing peak does not mean that interest rates immediately peaked and fell
Social financing growth ahead of the bond market changes, and usually the social financing growth rate to the bond market is faster than the social financing growth rate slowdown on the bond market.
On the one hand, social finance recovery is usually 0~3 months ahead of the bond market decline, with the exception of 15 years (ahead of the bond market by about 1.5Y). 05 years in December, 08 years in December, 12 years in May, 20 years in May the social finance growth rate rebounded, corresponding to the 10Y bond yields in 06 years in March, 08 years in December, 12 years in July, 20 years in May to the upside. But May 15 social financing growth rate upward leading the bond market about 1.5Y, mainly due to the 15-16 years channel business development rapidly, management of the big year of the bond bull market continued.
On the other hand, the social financing fall back leading bond market up time varies greatly, between half a year ~ 2 years. 08 first half and 13 second half of the social financing growth rate leading the bond market half a year or so to the downside; and the rest of the time the social financing fall back leading time is longer, about 1 ~ 2 years. For example, in Dec 03, Jan 10, Apr 16, social finance growth rate fell, corresponding to 10Y bond yields in Nov 04, Dec 11, Jan 18 downward, leading 11 months, 2 years and 1.5 years respectively.
3. The economy is steadily recovering, and the risk of inflation still exists
The economy showed a V-shaped trend in 2020, and from the Troika's point of view, the export growth rate has continued to exceed expectations, real estate investment continues to maintain its resilience, consumption and manufacturing investment is slowly recovering, and the investment in infrastructure is much lower than at the beginning of the year. Market expectations. How to judge the next year's economic trend, we also analyze from the infrastructure, investment, consumption several.
3.1 Manufacturing investment or next year's highlights
October cumulative year-on-year decline in manufacturing investment continued to narrow to -5.3%, the growth rate of the month has rebounded to 3.7%, and the manufacturing PMI is still located in the expansion zone.
Industrial enterprises are shifting from passive de-stocking to active restocking.
The total profit of industrial enterprises above designated size in January-October was 0.7% year-on-year from negative, realizing positive growth for the first time in a year, of which the total profit in October month-on-month growth rate was significantly upward to 28.2%. 10-month end of the growth rate of finished goods inventories of industrial enterprises fell to 6.9%, the growth rate of inventories from up to down, the inventory of industrial enterprises inventory sales ratio rebounded to 48%, which is still lower than the level of the past two years. The inventory sales ratio of industrial enterprises rebounded to 48%, still lower than the level of the same period in the past two years, while the inventory turnover days in October increased by 1.5 days year-on-year to 18.8 days, the year-on-year increase continued to decline means that the pressure to go to the warehouse gradually reduced. Looking ahead, with the continuation of the economic recovery trend, coupled with the gradual reduction of the pressure to go to the warehouse, the industrial enterprise inventory still tends to replenish.
In addition, M1, PPI and other leading indicators have bottomed out, industrial enterprises are from passive to active inventory replenishment, inventory cycle on the economic pull contribution will be further up. From a comprehensive perspective, as demand picks up and profitability improves, the growth rate of manufacturing investment will continue to improve, and the power of economic endogenous growth will remain strong.
3.2 Infrastructure investment rebound is limited
From May to September, along with the decline in the proportion of infrastructure special debt (from 78% in January-April to 44% in October), the growth rate of infrastructure investment in the same month continued to fall (the old caliber back to 4.8%, the new caliber back to 3.2%). to 3.2%). Year-end project process accelerated, October infrastructure investment growth rebounded (old caliber rebounded to 7.3%, new caliber rebounded to 4.4%). We expect next year's government debt issuance to be difficult to surpass this year's, but after the epidemic, public **** fiscal spending may be more biased toward infrastructure projects. If the proportion of future government financing for infrastructure compared to the second half of this year, infrastructure investment growth is expected to continue into the first half of next year, but the rebound or more limited.
3.3 Real estate investment growth slowed down
Since July, the national housing boom index has been four consecutive months above 100, showing that the real estate industry is still maintaining the heat. real estate development and investment growth in October rebounded slightly to 12.2%, a record growth rate since 18 years since August. October commercial real estate sales, new construction, construction, completed area year-on-year growth rate have rebounded (respectively, 8, 5, 3, 24 percentage points to 24%, 4%, -2%, 6%), in the financing constraints housing enterprises to speed up the push back to the demand for capital enhancement of the growth rate of real estate sales and new construction growth rate of the rebound to support the real estate investment growth rate rebounded at a high level. The investment growth rate is high, and the new construction growth rate will support the real estate.
Looking ahead, if we limit the growth rate of real estate financing by three red lines, with the steady progress of the new regulations on real estate financing, half of the real estate enterprises will be more or less affected, and the growth rate of real estate financing will slow down, and under the constraints of financing, real estate enterprises tend to speed up the turnover of real estate, the cycle of the real estate will continue to be elongated.
But taking into account that residents' loans are still supported, China's urbanization dividend still exists, and the real estate market will develop smoothly under the city-based policy, as well as the 14th Five-Year Plan to emphasize the advancement of urbanization and the construction of the metropolitan area, we believe that next year's real estate growth rate or still maintain the resilience of the single-month year-on-year growth rate slowly decline.
3.4 Consumption is expected to continue to rebound
In October, the total retail sales year-on-year growth rate rebounded to 4.3%, which is still a big gap from the pre-epidemic growth rate of about 8%, and is expected to continue to rebound. The main reasons are:
) 1 Inflation rebound prompted a rebound in nominal consumption growth. Next year PPI upward trend will continue to make the nominal growth rate of consumption rebound.
)2 The room for travel is still large, helping to speed up consumption.
Since February, although the travel volume linear rebound, but to September the level of passenger traffic only rebounded to the average level of the same period in the last five years 61%, travel is still a large space to recover, and its subsequent rebound to help speed up consumption.
3) Employment continues to improve, and the gap between residents' incomes and consumption is large, the potential for consumption still exists. As of September, the urban survey unemployment rate was 5.4%, compared to February has fallen 0.8 percentage points, but still not back to the 18, 19 years of employment level (unemployment rate of 4.8% ~ 5.2%), with the employment data continue to improve, the residents of the willingness to consume will also become stronger. Income, as of September 20, the cumulative year-on-year disposable income of residents was 2.8%, located in the historical low, and residents' income and consumption growth rate of a large gap, overall, the potential for consumption still exists.
)4 Urbanization dividend is still there, supporting consumption rebound. In 2018, China's urbanization rate was 59%, which is still about 23 percentage points away from the level of developed countries, and the rate of urbanization has continued to slow down since 2015, so there is still more room for China's urbanization rate to go up.
3.5 Export power switch, foreign demand resilience continues
In the second half of this year, the resumption of work + Preventing the epidemic in parallel to support our foreign demand. Thanks to the effective control of the epidemic, the recovery of foreign trade is also leading the world, China's exports accounted for the proportion of the world appeared to significantly increase since June China's export growth rate for four consecutive months to maintain positive growth. Specifically, April to May is mainly anti-epidemic materials support, textile products, medical instruments and apparatus and plastic products in May total export growth rate of up to 72.2%. 6-7 months of anti-epidemic pull declined, overseas countries are gradually lifting the blockade, the recovery of production and life continue to support our foreign demand. 8 months of year-on-year export growth rate rebounded to 9.5%, anti-epidemic materials pull is still supportive, coupled with the recovery of overseas economies, the overall export data of many categories is good. The overall export data of many categories is good, the overseas from the anti-epidemic stage to the resumption of production, the resumption of work + anti-epidemic parallel support for our foreign demand.
By the end of the 10th, the global manufacturing PMI was in the expansion zone for four consecutive months; Japan's manufacturing sector continued to shrink, but the strength of the U.S. and eurozone manufacturing sector expansion tended to rise. IMF forecast data show that economic growth in the major economies in 2021 will turn from negative to positive, although the rebound in overseas epidemics will make the pace of economic recovery slowed down at a stage, but the good news is that, with the epidemics continued to fall in the case of the disease, as well as the current vaccine research and development is still in order. The current vaccine research and development is still in order, and the impact of the small rebound of the epidemic on the economy is gradually weakening.
As of November 3, the global **** there are 20 vaccine R & D into the stage 3, if the vaccine popularity + overseas economic recovery is strong, China's export growth rate or fall back to normalization, but the overall pivot is still likely to be higher than the normal period. Sinopharm announced on November 25 that it has submitted an application to the State Drug Administration for the listing of the new crown vaccine, according to the introduction, China Biological has done a good job in preparing for large-scale production, and next year's production capacity is expected to reach more than 1 billion doses, which will be able to ensure a safe and adequate supply of vaccines.
3.6 Reflation is restarting
Next year's core CPI Lift CPI CPI Lift CPI CPI CPI CPI< Pressure is limited. October CPI year-on-year decline to 0.5%, since August pork prices continued to decline significantly, hog inventory, hogs out of the substantial rebound in pork supply and demand continued to ease under the price of pigs or continue to fall; June to September, the core CPI year-on-year continued to rise to 0.2%, fell to 0.1% in October.
PPI Upside risk not eliminated. Although the PPI year-on-year September-October short-term fall, but looking ahead to the first half of next year, the domestic economy has been steadily recovering, the foreign economy is gradually recovering, coupled with the current round of U.S. and European financial regulatory relaxation, the global central bank unprecedented easing (for example, the U.S. directly opened up the monetization of fiscal deficits), superimposed on the next year's low-base effect of the price of crude oil, the risk of global inflation is heating up.
PPI Running Cycle Perspective, the current round of PPI uptick will last until next year 2 quarter. Since '96, the PPI has experienced multiple rounds of upward and downward phases, with the upward and downward phases lasting an average of 13 months and 19 months respectively. In May this year, the PPI stage bottomed out, the year-on-year growth rate fell to -3.7%, according to the average duration of the upward phase of the projected number of months, the PPI oscillating back to the trend or continue to next year around June.
It is expected that next year PPI year-on-year first up and then down. Changes in international oil prices and domestic rebar prices explain about 94% of the year-on-year growth rate of China's PPI, and the forecast effect of the PPI inflection point is relatively good, the forecast results show that next year, the PPI tends to rebound, the high probability of next year in May.
4. Central Bank reintroduced the gate, the new rules of asset management attack
4.1 dilute the quantitative goals, build a double cycle
October 26, 2020 The Fifth Plenary Session of the 19th National People's Congress was held from October 26 to 29, and the "Recommendations" of the 14th Five-Year Plan gave China's economic development goals for 2035 in a qualitative way, with related expressions such as: the total economic output and the per capita income of both urban and rural residents will step up to a new level; the per capita GDP will reach the level of middle-developed countries, and the middle-income group will be expanded significantly; and the gap between the development of urban and rural areas and the gap between the living standards of the population will be reduced significantly.
The Fifth Plenary Session downplayed the quantitative goals and focused on improving quality and efficiency.
The 14th Five-Year Plan is centered on the inner cycle, which is dominated by the expansion of consumption and independent innovation. The main line of development is through bigger and stronger capital markets, promoting urbanization, accelerating the construction of metropolitan areas, and accelerating population mobility.
4.2 Central Bank reintroduced the monetary gate, confirming the normalization of the currency
Short-term tightening is still lack of fundamental support. On the one hand, the current economic growth rate has not returned to the potential growth rate level, and inflation is still falling since September. On the other hand, the central bank said the epidemic special period should be allowed to have a stage of macro leverage, said next year leverage more stable, which means that next year, the central bank from the stage of tolerance to leverage enhancement to stabilize leverage return. Overall, the stability of monetary policy at this stage is expected to continue, and whether the subsequent tightening to see the sustainability of the economic repair, the magnitude of next year's PPI upside and other fundamental factors. 1 MLF as an anchor, the spread relationship between the two: monetary easing phase -9BP; monetary tightening overlaid on the period of deleveraging, the certificate of deposit rate is significantly higher than the MLF interest rate; the monetary neutral phase -30~15BP.
Monetary Margins Tightening, credit overshooting, contraction of cargo base scale and structural deposit suppression are 5 the main reasons for the release of certificates of deposit to rise in price since May. Monetary policy in the fourth quarter to maintain neutral, credit growth slowed down, but the pressure of structured deposits pressure is still big (according to the pressure to the beginning of the year 2 / 3 measurement, large banks and small and medium-sized banks monthly pressure to reduce the size of the chain of 165% and down 23% respectively), deposit rates or high shock.
4.5 Liquidity stratification reappeared, but better than the period of the Baoshang incident
11 November October One is that the standard of pledged securities will be raised, resulting in a more difficult pledge financing, and the second is that the thunderstorms lead to the warming of the risk aversion, the product redemption pressure increases, redemption pressure under the liquidity of interest rate bonds, bonds, on the contrary, will be the first to be sold. From the experience of 16 and 19 years, with the introduction of a line of the two will ease credit risk, care of liquidity policy, the bond market will be in the overshoot after the upside opportunities.
4.6 Foreign capital bond buying slowed down, the pressure on banks to match bonds eased
Foreign capital bond buying slowed down, but the follow-up is still supportive.
October foreign-funded bond allocation ended the previous three consecutive months of the trend of hundreds of billions of dollars of additional holdings, the month's incremental fall back to 54.5 billion yuan, with the power of bond allocation slowed down significantly. Looking forward to the follow-up, we believe that foreign investment in bond allocation follow-up is still supportive, the main reasons are:
1) bond market interconnection, the extension of the bond spot trading time, is conducive to the participation of foreign institutions in the domestic bond market transactions; 2) the bond market opening up to the outside world to speed up, in September of this year, FTSE Russell announced that the Chinese bonds will be included in the WGBI index (further confirmed in March of next year), according to the previous experience, before and after the inclusion of international bond indices (BBGA index, GBI-EMGD index), foreign capital inflows into the domestic bond market has accelerated significantly; 3) the RMB exchange rate is supported in the long term; 4) the Fifth Plenary Session of the Central Committee of the Communist Party of China (CPC) has emphasized the " formation of a new pattern of opening up to the outside world ...... to implement a high level of opening up to the outside world", deepening the opening up to the outside world, foreign capital into the market more convenient.
October bank position growth rate of 18%, the highest growth rate in nearly a year, showing that the power of debt allocation is strong; bank asset side of the debt allocation accounted for 0.6 percentage points, while the loan accounted for 1.1 percentage points, credit to the bank to allocate the space of the debt has been squeezed.
Looking ahead, the pressure on banks to allocate debt is easing, and the space for debt allocation is picking up. The main reasons are: 1) the supply of the bond market is expected to fall next year; 2) the growth rate of social financing slowed down after the peak, credit pressure to ease; 3) the bank's general lending rate continued to fall, the table assets ratio has improved; 4) real estate financing under the new rules, used for real estate lending funds are expected to flow to the bond market; 5) the new rules of management into the critical period, is conducive to the flow of funds to the bond market.
Annuities are on the rise to match the power of debt. 2016 to 2018 corporate annuity fiduciary management asset size growth rate of 24%, 21%, 20%. 2020 January-October exchange annuity bond positions totaled 602.2 billion yuan, an increment of 48.5 billion, accounting for the total number of exchanges (SZSE + SSE) and incremental 4%, 2%, respectively, of its position in the structure of the main credit bonds.
The new regulations on asset management have entered a critical stage. As of the end of June 2020, the inventory scale of net-value-type bank wealth management products was about 13.24 trillion yuan, an increase of 67% year-on-year, accounting for 53.82% of the inventory balance of all wealth management products, and the progress of the net-value transformation of bank wealth management products is more than half. However, the difficulty of bank financial management rectification is still relatively large, and the difficulty lies mainly in the difficulty of dissolving stock assets, specifically, the dissolution of unlisted equity assets or industrial funds in stock assets, the dissolution of non-performing assets in off-balance-sheet wealth management, and the dissolution of capital supplementation tools for commercial banks are still key. In addition, the trust non-standard rectification rolling renewal pressure is still big, cash management class financial products regulatory tightening, scale yield face double decline.
Next year, non-standard pressure is greater. 2019 the end of the financial management of non-standard assets held 3.7 trillion, 2019 financial management of non-standard slow pace of suppression, only suppressed 140 billion yuan, and 18 years of financial management of non-standard suppression of nearly 1 trillion yuan, accounting for the year non-standard reduction of about 43%. Next year, the new management regulations are postponed to expire, the financial rectification needs to be accelerated, superimposed on the trust non-standard pressure is still big, real estate financing tightened, non-standard pressure is bigger.
5 Looking for relative value, waiting for the interest rate inflection point
5.1 Fundamental inflection point have not yet arrived
From the magnitude of adjustment and
From the point of view of the magnitude and duration of the adjustment, the end of the current round of bond bears is still missing the fire.
5.2 Interest rate inflection point are not yet arrived
From the leading indicators of the bond market, the social financing-M2 growth rate is worse than the 20 years October second top, if its leading bear to bull 7-8 months, the end of the bond bear to next year 2 quarter. From the bond market high-frequency indicators, the current implied tax rate stabilized at 13-15%, from the bear tail signal (21%) there is still a large distance. In addition, the last three rounds of bear tail interest rates are overshooting to above the historical average, the end of the bear market are bear flat posture, and the current interest rates are still not overshooting to above the average. 10 The pivot of the 10 year Treasury rate may be around 3.2% . On the one hand, deleveraging pushed interest rates to open a downward channel. In the short term, the probability of stabilizing leverage next year; in the long term, during the epidemic, the government, residents, enterprises and so on, there is a stage of leverage, but with the economic growth rate of the rebound come to an end, the prevention and resolution of systemic risk will be more emphasized, the tightening of policy, the exit of the broad credit, the real estate financing under the tightening of the leverage of each sector will fall to a reasonable level, and then promote the The first step in the process is to make sure that you have a good understanding of what you are doing and how you are doing it.
On the other hand, China's potential economic growth rate is going down, and interest rates are trending down. The potential economic growth rate tends to decline, the main reason is: China's demographic dividend from 2010 onwards appeared the inflection point of the downward trend; since 2015, urbanization has continued to slow down the speed of advancement; from 2017 onwards, China opened the financial deleveraging, 18 years of the new regulations on management of the breakthrough of the rigid exchange rate + channel + non-standard limit, reducing the growth rate of money and debt; in addition, the loose monetary policy in the early period of the future economic growth potential; in the future, as the labor force and the capital of the future growth potential, the interest rate trend will continue. growth potential; the future with the decline in labor and capital supply of China's economy potential growth rate will also be further step down.
As China's 10-year bond yields and nominal GDP growth rate trend is basically the same, China's economy has shifted from high-speed growth to high-quality development stage, with the slowdown in economic growth, the bond market interest rate pivot will tend to fall.
5.4 Debt market external comparison
Relative to the stock, interest rate debt cost-effective enhancement, but it is difficult to say "cheap".
Relative to A-shares, the bond market price has risen to a historical pivot position: the spread between CSI 300 dividend yield and 10-year treasury bonds is at 51% since 2005; the spread between GEM E/P and 10-year treasury bonds is at 37% since 2010 (as of November 24, 20, the same below).
Relative to loans, the bond market price/performance ratio has improved but is still slightly low: The spread between 10-year treasury bonds and lending rates has risen back to 1H19 levels, and is in the 30% quartile since 2010, with a distance of 14BP from the historical median level.
Relative to U.S. bonds: the U.S.-China spread is high, and may narrow slightly in the follow-up. As of November 24, the 10-year spread on Chinese and U.S. bonds was 241bp, which is at an all-time high. In November, the Federal Reserve said at its interest rate meeting that it would keep interest rates unchanged and announced that it would maintain its accommodative policy until it achieved its long-term inflation target of maximum employment and 2%, and that it had not run out of ammunition in U.S. monetary policy. In addition, Powell said the U.S. monetary policy has not "run out of steam", the economic recovery from the target is still a long way off, we think this means that the subsequent easing or increase. Monetary easing + US debt supply pressure + Resumption of labor resumption = US debt steepening. The narrowing of the US-China spread could materialize with either an accelerated uptick in US bond yields (US inflation exceeding expectations) or a relatively slower uptick in Chinese bonds (domestic inflation falling short of expectations + large overseas inflows into the bond market).
5.5 Bond market internal ratios
Interest rate bonds are more valuable for short-end allocations. As of November 24th (same below), Treasury short-end (3m, 1Y, 3Y) has the highest allocation value (all yields have been overshooting above historical medians), Treasury allocation value is higher than CDB overall, and CDB short-end (3m) has higher allocation value (all yields have been overshooting above historical medians).
30 Yearly varieties of scarcity. 30-year interest rate bonds, although the historical quartile is low, but the Ministry of Finance released on November 10, "on further improving the issuance of local government bonds," the new general obligation bond maturity restrictions (more than 10 years accounted for no more than 30%, while the first ten months of this year accounted for as much as 45%), the refinancing of general obligation bonds should be controlled in less than 10 years (first ten months of this year, the weighted average maturity of 13.5 years). It is expected that the subsequent local bond issuance period will be shortened, 30-year local bonds may become a scarcity of securities, its configuration value (especially for insurance institutions) highlights.
Relative to debt tranches, interest rate bonds have a slightly lower allocation value: The YTM-10-year CD spread for tranches below $80 (parity) is in the 96% quartile, and the spread between the rest of the parity pure bonds and the 10-year CD is relatively small (below the 60% quartile).
Short-end interest rate bonds relative to credit bonds configuration value enhancement, specifically can be viewed from the following aspects:
Absolute interest rates, by the impact of ultra-anticipated credit defaults, the bond market has been sharply adjusted, and the credit bond (AAAAA-1Y short-term financing 3Y5Y medium-term notes, the same below) yields are basically in the 30% quartile. ) yields are basically above the 30% quartile, and interest rate bond yields are basically around the 30%~70% quartile;
Spreads: spreads between treasury bonds and credit bonds have widened (all above the 30% quartile), and spreads for AAA-grade 3Y5Y medium notes are above the 50% quartile;
Leveraged Arbitrage: Currently, the 1-year short-term financing (AAAAA), 5Y Chinese banknotes (AAA), 5Y CDC leveraged arbitrage space are still available (located in the 48% 46%, 46%, 41% quartile), AA-grade 5Y Chinese banknote credit bond arbitrage space is relatively small, located in the 37% quartile.
5.6 Stable word, wait for the inflection point
This article is derived from Jiangchao Macro Bonds Research