Jiang Chao: The bond market remains unchanged, the equity market will gradually return to performance-driven
Resolving local debt, interest rate hubs decline (Haitong Bond Weekly Exchange and Thinking No. 311, Jiang Chao, etc.) Summary Last week the bond market increased slightly, and the national bond interest rate fell by 4bp. AAA, AA grade corporate bonds and urban investment debt interest rates declinedAt 5, 3, and 6 bp, convertible bonds fell by 1.
Economic growth has bottomed out, and a new modest rebound.
The economic start in 19 years was not good. In the first two months, the industrial growth rate was subdivided. The income growth rate of industrial enterprises declined, and the profit growth rate turned negative.
However, since March, the manufacturing PMI has rebounded sharply. At the same time, the coal consumption growth rate of the six major groups has changed from negative to positive. The national crude steel output growth rate is still high, which means that the industrial economy has improved significantly in March.
In February 19, the CPI fell by one.
The one-and-a-half year low of 5% triggered a reduction in the risk of deflation.
However, since entering March, pig prices have risen sharply, or they have jumped sharply due to the emergence of 3 or 4 months.
However, due to the further decrease in the scale of growth since April, the non-food prices of PPI and CPI will be lowered. Therefore, in view of the gradual reduction in the future, despite the upward pressure, it is beneficial to maintain at 2.
Initial suspension was suspended and currency exchange rates rebounded.
Last week extended the suspension of the reverse repurchase operation again, withdrawing 110 billion currencies in the open market, and cumulatively withdrawing currency of 6.90 billion in March.
However, at the beginning of the year, it was said that the fiscal expenditure at the end of the month broke through and the market liquidity was still abundant.
Based on the experience of the past two years, fiscal lending in March this year is expected to reach 700 billion yuan. Therefore, in summary, the over-reserve ratio of financial institutions in March should be basically the same as that in February, at 1.
About 7%, higher than the same period last year.
3%, but lower than 2 last December.
The Democratic Prime Minister stated that he would not follow the old path of flooding, and President Yanchang Yi said that this year, China’s reserve reduction rate will be reduced, which means that there is limited room for further easing of monetary policy.
In addition, the short-term Chinese economy has entered a bottom-up period and gradually recovered from a low level.
We believe that monetary policy will remain accommodative in the future, but the degree of easing may be lower than in the first quarter, so the currency exchange rate center may also be slightly higher than the low in the first quarter.
To resolve local debts, the interest rate center fell.
On March 12, this year, Hao Yuzhu, general manager of Shanxi Traffic Control Group, stated at a 2019 working conference that Shanxi Financial Control Group and seven financial institutions led by the China Development Bank Shanxi Branch successfully signed a syndicated loan of US $ 260.7 billion, reducing financing 北京夜生活网 costs and effectively preventingEliminate hidden dangers of regional financial risks.
In February and March of this year, Bloomberg and other media reported that CDB was working with Zhenjiang, Xiangtan and other regions to promote the resolution of hidden debts.
In China, although a local government debt swap has been conducted in 15 years, in theory the local government debt has all become explicit.
However, considering the special national conditions above, there are still a large number of hidden debts in various places. These debts do not theoretically belong to local government debts, but they still have inextricable relationships with local governments, so that financing platforms pass fake PPP., Debts due to illegal guarantee commitments, etc.
These local government hidden debts usually have high interest rates. At the same time, due to the endorsement of government implicit guarantees, the actual default risk is extremely low, so the existence of government hidden debts has greatly increased the market’s central interest rate level.
However, if the high-interest local government hidden debt can be replaced by a low-interest CDB loan or other debt, it is actually equivalent to reducing the true risk-free interest rate.
The bond market fluctuated and allocated credit to debt.
Looking ahead, we believe that the debt market will remain volatile: favorable factors for the debt market include the deceleration of the overseas economy, the US interest rate hike is expected to decline, and the global government bond interest rates are collectively falling.
The unregulated domestic regulation of shadow banking, coupled with the active disposal of local hidden debts, has helped to lower China’s central interest rate level.
At the same time, the surge in pig prices has gradually rebounded, the domestic economy has entered a bottom-up period, the downward speed has slowed down, and the unprecedented reduction in tax and fee rates has reduced the need for further monetary easing.
At the end of the millennium, the currency continued to be withdrawn, and the currency interest rate center rose significantly, which is also not conducive to increasing interest rates.
In terms of the types of bond market allocations, we still maintain the priority of convertible bonds and credit bonds, followed by interest rate bonds.
With the gradual development of wide finance and wide credit, corporate profits are expected to bottom out, which is beneficial to the stock market and credit debt, while interest rate debt will remain low and fluctuate.
I. Monetary interest rate: Funds stably cross quarterly 1) Currency interest rate differentiation.
Under the quarter-end effect, the interest rate of the money market is differentiated, funds are tight across seasons, and overnight funds are slightly loose.
Last week, the open market reverse repurchase expired 110 billion yuan, with a net return of 110 billion yuan.
The average R007 is 47BP to 3.36%, R001 average goes down 30BP to 2.
The average value of DR007 is 6BP to 2.
77%, the average of DR001 is 32BP to 2.
2) Inverted US debt yields and domestic monetary policy.
The Treasury yield curve reflects changes in US monetary policy and economic expectations.
The current U.S. Treasury yield inversion is to be followed up or repaired through short-term downside, which indicates that a new round of interest rate cuts may begin in the future.
Inverted U.S. Treasury yield curves are also often a reliable signal of a recession.
The recession of the US economy in 1980, 1981, 1990, 2001, and 2007 occurred after 17, 11, 18, 14, 23 months of the inverted yield curve, which means that the term spread turned negative.One or two years later, according to this reasoning, the US economy’s recurrence of recession will be around 2020-2021.
The short-term internal national monetary policy is still mainly to resolve internal contradictions. If the US economy gradually declines in the next 1-2 years, the United States will open the road of monetary easing again, which will still have an impact on domestic monetary policy.
3) Funds will warm up.
Although the recent budget has reduced public market funding, under the background of a large amount of financial investment at the end of March, the end of the quarterly assessment, and no net withdrawal in the open market in April, the market capital will expand and loose in early April, and the currency exchange rate may continue to fall.
Second, interest rate debt: The bond market remains volatile. 1) The bond market has risen.
Affected by the Federal Reserve’s suspension of interest rate hikes and the downward impact of US bond yields, the domestic bond market grew.
Last week the one-year Treasury note closed at 2.
44%, down 3BP from the previous week; 10-year government bonds closed at 3.
07%, down 4BP from the previous week.
The one-year CDB bond closed at 2.
55%, down 5BP from the previous week; 10-year China Development Bond closed at 3.
58%, down 4BP from the previous week.
2) Supply is increasing and demand is weak.
Last week, book-entry government bonds were issued with US $ 10 billion and US $ 20 billion due; policy financial bonds were US $ 91.1 billion and US $ 0 billion due; local government debt was US $ 311.5 billion and US $ 76.3 billion due.
A total of 412.6 billion interest rate bonds were issued, an increase of 194.7 billion from the previous month, and a net supply of 316.3 billion, an increase of 183.2 billion from the previous month.
Certificate of Deposit Net Issue -3081.
400 million, a decrease of 5764 from the previous month.
6ppm, the issue rate of 3M certificates of deposit of joint-stock banks was 16 lower than the previous week.
3) Short-term economic improvement.
Since March, the economy has improved, and the manufacturing PMI has risen to 50.
5% above the line.
The terminal demand has shown an improvement, but there is still some differentiation. The growth rate of land sales has improved, but the difference between the first and second lines and the third and fourth lines has continued to expand.The growth rate of energy coal rebounded, and the operating rates of the automobile, steel, and chemical industries also reset and rebounded.
4) The pattern of bond market shocks remains unchanged.
From the perspective of the domestic economic fundamentals, the economy is currently bottoming out and can continue to recover rapidly.
From a policy perspective, the focus of monetary policy in the future is to unblock the monetary policy mechanism and reduce the room for conventional relaxation, while the positive fiscal policies such as tax and fee reduction will underpin the economy in the future.
Fundamentals and policies are not conducive to the bond market. The short and long ends of the bond market lack downward momentum, but the loose environment of global currencies supports China’s interest rate to remain low.
Taken together, we believe that the bond market will remain volatile in the future.
Third, credit bonds: Demand is still supported 1) Credit bond yields have fallen.
The yield of credit bonds followed the downturn last week. The average yield of AAA corporate bonds fell by 5BP, the average yield of AA corporate bonds fell by 3BP, and the yield of urban investment bonds dropped by 6BP.
2) The scale of financial management is stable, and the proportion of bonds has increased.China Wealth Management announced the 2018 financial management report, ending the bank’s non-guaranteed financial management balance at the end of 1822.
04 trillion, compared with the end of 2017 (22.
(17 trillion), a slight decline, and capital guaranteed financial management does not meet the new requirements of asset management, and no longer counted.
In asset allocation of wealth management products, bonds accounted for 53.
35% by the end of 2017 (42.
(19%) increased significantly, while the proportion of cash and bank deposits increased from 13.
91% excellence dropped to 5.
75%, non-standard proportion from 16.
22% rose slightly to 17.
23%, or it may be related to the fact that the guaranteed capital management is no longer included in the statistics. Assuming that the original guaranteed capital management non-standard allocation is 0, the balance of the non-standard assets of the financial allocation decreased by 1 trillion, which is in line with the fact that the non-standard shrinkage.
3) Demand for credit bond allocation is still supported.
After the new rules of asset management, the rapid growth of bank wealth management is no longer possible, and it is still likely to be compressed before the end of the transition period in 2020. However, the impact on the allocation of credit bonds is not so great.Under the same circumstances, the non-standard proportion will continue to decline, the proportion of cash and bank deposits will continue to gradually increase under the pressure of yield, and the proportion of credit and debt allocation may continue to rise; instead, the bank’s on-balance sheet demand for credit and debt will also be supported.Especially high-grade credit bonds where credit risk allows.
Fourth, convertible bonds: pay attention to the performance of annual reports 1) The convertible bond index fell.
The CSI Convertible Bond Index fell by one last week.
42%, with an average daily volume of 64.
500 million, down 17% from the previous month.
The total index of convertible bonds we calculated (including public offering EB) dropped by 1.
03%; during the same period, the Shanghai and Shenzhen 300 Index rose by 1.
01%, the GEM Index fell by 0.
02%, SSE 50 rose by 1.
Each bond 28 rose 117, the main stock 42 rose 1 flat 102 fell, Zheshang convertible bonds and other 4 convertible bonds listed.
The top five gainers were Kangtai Convertible Bonds (23.
09%), Tianma convertible bonds (12.
01%), Shenglu convertible bonds (4.
75%), Zheshang convertible bonds (3.
64%), Kaifa convertible bonds (3.
2) 7 convertible bonds and 1 public offering of EB.
Last week, Asia-Pacific Pharmaceuticals, Qixingxingchen, Dafeng Industrial, Hyundai Pharmacy, Precision Testing Electronics, the common people, Straits Environmental Protection 7 convertible bonds and 19 Dongchuang EB issued.
Rong Sheng Environmental Protection (3.
3 trillion) convertible bonds received approval, Shanxi Securities (28 trillion) terminated the issuance of convertible bonds, Central Environmental Protection (2.
9 trillion), Wen Can (8 trillion) convertible bonds passed the meeting, Dechuang Environmental Protection (2 trillion) convertible bonds were recovered by the CSRC.
In addition, last week, Zijin Bank (4.5 billion), Huaibei Mining (27.
58 ppm), 8 companies including China Investment Capital (45 ppm) announced plans to convert debt.
3) Pay attention to the performance of the annual report.
Last week, the CSI Convertible Bond Index shrank, and the decline was larger than that of the underlying stocks.
In terms of individual bonds, there was a rise and a decline but a lot of declines. Among them, the stocks and high-priced bonds fell in cracks. From the perspective of the industry, it was a period of deeper TMT and consumer sectors.
In addition, in recent weeks is the intensive disclosure period of the annual report. Successive performances that have fallen short of expectations have led to a decline in convertible bonds.
After the estimated repair in the first quarter, the equity market will gradually return to performance-driven, and the conversion of bonds requires more attention to performance.You can focus on the new bonds that have recently been listed (the new bonds have all released performance reports), and the uncertainty of performance is relatively relative.
In terms of strategy, focus on digging into areas where the increase in the previous period is not high, or have recently been supplemented.
Such as TMT medium and low-priced coupons, banks, brokers, and consumption.
The mid-to-long term is optimistic about the convertible bond market, and everybody can pay attention to it.
Risk reminder: fundamentals change, monetary policy is not up to expectations, and the funding side changes significantly.