In the past three quarters, the bond market experienced a loose capital market in July, a central bank interest rate cut in August and a slight recovery in September, and the overall yield showed a trend of decline first and then rising.
Specifically, the scale of bond issuance in the primary market in the third quarter decreased by 3.17% compared with the same period last year. The newly issued bonds were mainly short-term, and the number of AAA-rated bond issuance declined.
The pace of issuance of local government bonds has slowed down significantly, with Jiangsu Province, Shanghai City and Guangdong Province ranked among the top three in total issuance.
In addition, against the background of the continuous "asset shortage", the yields of bonds in the secondary market continue to decline, and the narrowing of the credit spread of bonds with different ratings for the same period is relatively close.
issuance scale has decreased, and the number of high-rated bonds has declined
According to Choice data statistics, in the third quarter of this year, issued a total of 11,630 bonds in the primary market, with a total issuance of 15.35 trillion yuan, a year-on-year decrease of 3.17%. Among them, August was the peak of bond issuance in the third quarter, with a total of 4,194 bonds issued, with a total issuance of 5.35 trillion yuan and a net financing of 468.976 billion yuan.
Data source: Choice data
From the perspective of bond issuance types, the number and scale of issuance of non-jinxin bonds are both ranked first in . In the third quarter, a total of 1,239 were issued, with a total issuance of 1.22 trillion yuan. The second is corporate bonds and medium notes, with financing scale accounting for 25.20% and 22.36% respectively.
Data source: Choice data
Bond issuance term is still mainly medium and short term , 67.05% of bond issuance term is within 1 year, and 18.29% of bond issuance term is 1-3 years.
Data source: Choice Data
In recent years, the number of bond issuances with the main rating AAA accounts for the majority, but the proportion of AAA-level bond issuances in the third quarter of this year has decreased.
Specifically, issued 4,801 AAA-rated bonds in the third quarter, accounting for 41.28%, a decrease of 4.05 percentage points from the same period last year. The proportion of bond issuances with the main rating of AA+ increased by 1.05 percentage points year-on-year, and the proportion of bond issuances with the main rating of AA decreased by 2.13 percentage points year-on-year.
Data source: Choice data
Local government bond issuance slowed down, Shanghai ranked first in the financing amount
In the third quarter, the pace of issuance of local government bonds slowed down significantly. issued a total of 246 bonds in three months, with a total issuance of 1098.335 billion yuan, a year-on-year decrease of 51.71%. Due to the large repayment scale of , the net financing amount is -37.945 billion yuan.
by region, among the 31 provinces, cities and autonomous regions, Jiangsu Province , Shanghai City and Guangdong Province ranked among the top three total local government bond issuances, with bonds issued of 115.797 billion, 82.12 billion and 69.55 billion respectively. Among them, Shanghai had the highest net financing amount in the third quarter, reaching 67.84 billion yuan.
Data source: Choice data
Regarding the outlook for the issuance of local government bonds in the fourth quarter, Industrial Securities previously mentioned in its research report that judging from the local bond issuance plans for the fourth quarter of 2022 disclosed by various regions, most of the allocated balance limits are planned to be issued in October (75%), and a small part is issued in November. October may face a small peak in the issuance of new special bonds. According to previous years' experience, the advance payment limit for special bonds in 2023 may be issued around December this year.
Asset shortage continues, credit bond yields decline
In the secondary market, the "asset shortage" continued in the third quarter, and credit bond yields continued to decline.
According to Choice data statistics, as of September 30, the yields of 1-year, 3-year and 5-year AAA-level medium and short-term notes were 2.16%, 2.67%, and 2.98%, respectively, and the cumulative decline in a single quarter was 26.08BP, 28.18BP and 34.83BP, respectively.
Data source: Choice Data
In terms of credit spreads, asset shortage drives superimposed supply contraction, and the narrowing range of credit spreads for different maturities of each level is relatively close. Taking the 3-year medium and short-term note credit spread as an example, as of September 30, 2022, the 3-year AAA, AA+, and AA medium and short-term note credit spreads were 27.80BP, 43.64BP, and 62.64BP, respectively, and the narrowing range of a single quarter was within the 5.5BP-7.0BP range.
Data source: Choice data
Note: Credit spread = yield on credit bond maturity - yield on national development bond maturity for the same period
Institutional view - Fourth quarter outlook
Tianfeng Securities : We believe that 1-year MLF is still the key guide for ten-year treasury bonds. At present, unless incremental policies, such as further issuance of special bonds and other tools, drive social financing to further increase, the probability of interest rate cuts this year is not high, but the possibility cannot be ruled out in the future (such as the first quarter of next year), so 2.75% can still be regarded as the reference upper limit. In terms of rhythm, combined with the conference background and social financing trend, there may be phased trading opportunities from October to November, but the overall space is relatively weak. From November to December, you should pay attention to the possible disturbances caused by the policy connection this year and next year.
Zheshang Securities :Review of the third quarter, monetary policy overall camera choice orientation is obvious, the use of tools is relatively restrained, and the narrow liquidity remains reasonably abundant. Looking ahead to the fourth quarter, internal and external constraints of monetary policy will increase, but the direction of timely decision-making is unlikely to change, and providing necessary liquidity to entities is the core goal. Map to the performance of tools and capital markets, it is expected that the use of low-volume reverse repurchase and MLF shrinkage tools will be normalized, and the capital market will not tighten. There is a possibility of lowering the reserve requirement ratio and replacing MLF. The probability of lowering the policy interest rate is not high, and the 5-year LPR adjustment is still necessary.
CITIC Securities : With the support of policy, infrastructure and manufacturing investment will continue to play the role of "driver" of economic stable growth. Affected by the previous policy of stabilizing growth, the growth rate of infrastructure and manufacturing investment in August rose beyond expectations, becoming an important tool for economic recovery. On the one hand, infrastructure, as an important means for to regulate in counter-cyclical manner, can quickly form physical workload after policy tools are implemented, and drive the restoration of domestic investment intentions. On the other hand, since August, the State Council has repeatedly mentioned policy support for manufacturing and service industries, and it is expected that manufacturing investment in the fourth quarter will continue to support economic recovery. The high growth in infrastructure and manufacturing investment is closely related to policy support. On August 24, the State Council proposed 19 continuous measures to stabilize growth, including 300 billion yuan of policy development financial instruments; the local balance limit for more than 500 billion yuan of special bonds in accordance with the law, and the approval of a batch of mature infrastructure construction and other measures clearly provide support for subsequent infrastructure investment. Central Bank announced on September 28 to establish a special re-loan for equipment renewal and transformation to support manufacturing investment. It is expected that with the implementation of various policy tools in the fourth quarter, infrastructure and manufacturing investment will likely maintain a high growth rate, and continue to drive the recovery of physical demand.
This article is derived from Oriental Wealth Choice data
