On July 1, the central bank announced that it would carry out treasury bond borrowing operations for some primary dealers in the open market in the near future, and the yields of 10-year and 30-year treasury bonds rose by 4bps and 5bps respectively in a single day; On July 5, the central bank signed bond borrowing agreements with several major financial institutions, and there are currently hundreds of billions of yuan of medium- and long-term treasury bonds available for lending, which will be borrowed in an indefinite term and credit mode, and will continue to borrow and sell treasury bonds depending on the operation of the bond market.
For the first time in nearly 20 years, the PBOC has launched conventional treasury bond trading business in the secondary bond market. So, how to understand this behavior of the central bank? What will be the impact on the bond market?
How to understand the central bank's borrowing operation?
From the perspective of the legal system, the operation of treasury bonds in the secondary market has always been a legitimate means for the central bank to regulate liquidity. However, in recent years, the central bank has used more bond pledged repurchase methods to release/withdraw liquidity, such as the most commonly used open market reverse repurchase operation, that is, the central bank collects treasury bonds as collateral and invests funds into financial institutions (primary dealers), and the repurchase is that the central bank uses treasury bonds as collateral to borrow funds from financial institutions and withdraw liquidity.
The difference in the operation of the central bank this time is that the central bank directly borrows treasury bonds from financial institutions in the form of buy-out repo, and obtains the ownership of the treasury bonds, so it has the right to sell treasury bonds in the secondary market at the right time to achieve the purpose of recovering liquidity.
Compared with the positive repo, the central bank has a stronger initiative to sell bonds, has a clearer signal meaning, or can directly affect the market pricing of bond interest rates, and can also directly adjust the shape of the bond yield curve by specifying the maturity of the underlying bond.
The reason why the central bank chooses to sell securities instead of selling them directly may be mainly because the vast majority of the treasury bonds currently held by the central bank are special treasury bonds issued in a targeted manner, with short maturities and low liquidity, and the constraints on trading may be relatively greater.
Why does the PBOC continue to pay attention to the rise and fall of long-term bond yields?
Preventing risks in financial institutions is at the core of the regulators' attention. Although some institutions can obtain considerable capital gains in the market rotation, in the process of interest rate fluctuations, some institutions will inevitably need to bear the adjusted valuation damage, which will have a fluctuating impact on institutional earnings and net product value.
Therefore, referring to the experience of United States Silicon Valley Bank and the financial redemption wave at the end of 22, preventing the accumulation of systemic risks in the financial market at the macro level and correcting the trend of institutional pro-cyclical speculation are the core of the central bank's continuous expectation management of the long-end bond market.
In addition, from the perspective of growth, the rapid downward rate of interest rates is not consistent with the current trend of gradual stabilization and recovery of the economy, and it is necessary to prevent the yield curve of the bond market from flattening too much.
According to statistics, in the four trading days from 7.1 to 7.5, 323 of the 1,991 medium- and long-term bond funds (only initial funds) in the whole market showed a net value decline, while the net value of the two 30-year treasury bond ETFs in the passive index bond base that had previously grown in scale reached 0.75%.
How to understand "indefinite term" and "credit method"?
The PBOC's borrowing model avoids providing more unnecessary liquidity directly to the market, and at the same time makes its subsequent bond selling operations more flexible and sustainable, so as to give better play to the regulation and correction mechanism of the two-way instrument of treasury bond trading on the shape of the interest rate curve, which is justified and reasonable.
Previously, some market investors believed that the central bank borrowed bonds or adopted bond lending or outright repo, the former requiring bond collateral and the latter providing liquidity, which was relatively limited in feasibility and necessity.
From the actual results, the central bank can avoid injecting more unnecessary liquidity into the market after explicitly adopting the "credit method" to borrow, while the "indefinite term" will make the central bank's actual bond selling operation more flexible and sustainable, and there is also the possibility of expanding borrowing or early return, which is equivalent to increasing the potential "ammunition capacity", which can better support the central bank to regulate and correct the shape of the interest rate curve through the two-way operation of treasury bond trading.
Considering the positioning of the central bank itself as the main body of supervision, and at the same time, the allocation accounts of primary dealers such as state-owned banks themselves also retain a relatively large scale of long-term treasury bonds that are held to maturity and are not circulated in the market, and this borrowing operation will not have much impact on the actual bank over-reserves and quarter-end capital occupation, which is justified and reasonable.
|有什么影响？
一是影响市场情绪，抑制短期投机行为。前期央行虽然多次提示长债收益率风险引导预期，但效果不佳，而随着央行采取实质行动，卖债进入“实操”环节，债市热度有所下降，前期获利盘加速止盈。截止7月1日收盘，国债期货悉数收跌，30年期主力合约报108.44，跌1.06%；10年期主力合约报104.975，跌0.37%。现货市场中，10年期国债活跃券240004收益率大幅上升，央行公告发布前报2.2115%，随后一度升至2.2850%。
二是若后续卖出债券，将对市场供需产生实质影响，有利于稳定长债收益率，纠偏收益率曲线形态。斜向上的收益率曲线，不仅有助于提振市场预期，也会增强金融机构长期信贷意愿。建议密切关注央行借入国债过程中是否提供质押物，以及借入国债的期限和规模。
三是在资金存量博弈情况下强化了股债跷跷板效应。截止7月1日收盘，上证指数报2994.73，上涨0.92%；沪深300报3478.18，上涨0.48%。
The key to the trend of Treasury yields still depends on fundamentals
At present, it is still facing the situation of insufficient effective demand and weak confidence of micro subjects, the manufacturing PMI in June is still below the boom and bust line, and the complete reversal of the downward trend of long-term bond yields still needs the support of economic fundamentals. This requires further policy efforts to consolidate the foundation and cultivate the yuan. Fiscal policy will be strengthened, and efforts will be made to increase the issuance of treasury bonds, ensure necessary expenditures, and optimize the "debt-turning" policy to promote the return of local governments from a state of emergency.
Monetary policy will make room for maneuvering, increase support for the real economy, crack down on banks' illegal high-interest rate deposits, support small and medium-sized banks to replenish capital, appropriately increase the flexibility of the RMB exchange rate to curb carry trades, and further reduce the interest rate on existing housing loans.
