Some time ago, the editor went to the branch to teach fixed income related courses and found that many friends could not distinguish the relationship between " bond index " and " bond interest rate ". Many friends reported that the performance benchmark of fixed income asset management products is the "xx bond index", but experts talked about "interest rates" when talking about the fixed income market. What is the relationship between these two?
This issue will give you a brief introduction, and at the same time, we will give you a brief review of the bond market since this year.
The relationship between bond index and bond interest rate
We can simply understand that the relationship between "bond index" and "bond interest rate" is like a "seesaw", and the two are opposite.
Take "China Bond-New Comprehensive Index" as an example . The China Bond New Comprehensive Index is compiled based on "bond price", and "bond price" and "bond interest rate" are inverse relationship;
Simply put, " bond price = coupon income ÷ bond interest rate ", where coupon income is fixed, and bond interest rate changes with changes in market interest rate, so bond price also changes due to changes in bond interest rate.
Source: Investment Management Department
In the field of fixed income, whether it is an investment manager or a researcher, everyone is most concerned about "interest rate changes" rather than bond prices changes. This is different from the stock market's focus on stock prices. The bond market generally rarely discusses changes in "bond prices".
Bond Index and Bond Interest Rate Review this year
From the figure below, we can find that 10-year treasury bond interest rate and China Bond-Comprehensive Full Price Index , these two lines are completely opposite, which also confirms our view above.
Since the beginning of this year, the interest rate of 10-year treasury bonds has fallen from 3.18% to 2.97%, down 21bps; the China Bond-Comprehensive Full Price (Group Value) Index has risen from 120.24 to 121.74, up 1.25%. In other words, bond interest rates fell slightly, corresponding to a slight increase in bond index.
Figure: Comparison of bond index and 10-year treasury bond interest rate
trend since the beginning of this year
Source: wind
This year's bond interest rate trend, we can roughly divide it into four stages:
First stage:
Early in the year - March, investors are on this year's national There is strong confidence in the recovery of the domestic economy. In addition, the price of commodities has risen sharply, and bond interest rates have risen significantly, and the 10-year treasury bond interest rate has risen from 3.1% to 3.3%;
Phase 2:
April-June, although the market is worried about the rise of inflation , the monetary policy of central bank is stable and loose, and silver The capital market between the banks continues to be loose, coupled with the "unbalanced" of economic recovery, bond interest rates slowly declined, and the 10-year treasury bond interest rate fell from 3.3% to 3.1%;
Phase 3:
7, the State Council proposed a reduction in reserve requirement ratio beyond expectations, and the news completely exceeded market expectations. The 10-year treasury bond interest rate fell from 3.1% to 2.8%, which was only 30 higher than the historical lowest point of 2.5%. bps;
Phase 4:
8-October, after the cut in the reserve requirement ratio, although investors' expectations for further easing of monetary policy remained, bond interest rates did not further decline, and the 10-year treasury bond interest rate fluctuated at a low of 2.8%-2.9%. After the National Day, affected by factors such as the surge in domestic coal prices, the 10-year treasury bond interest rate rose to around 3.0%.
Figure: Analysis of the trend of interest rates for 10-year treasury bonds this year
Source: wind
Bond market outlook for the fourth quarter of this year
It is expected that the bond interest rates will fluctuate in the fourth quarter of this year, and the same is true for the bond index to fluctuate.
;; From the fundamentals, , affected by the scattered epidemics in various places, the pressure on economic growth is still very great. Whether from the high-frequency data or the recently released third quarter GDP, it can be seen that the overall fundamentals are weak, which is beneficial to the bond market as a whole.
;; From the perspective of inflation , inflation has recently become the biggest focus of the global macroeconomic . After the National Day, with the surge in domestic coal prices and food prices also increased significantly. Although the central bank said that inflation has little impact, the market is once again worried about the risk of inflation upward, which has a negative impact on the bond market.
;; From the perspective of monetary policy , judging from the recent statements of the central bank, the expectation of central bank reserve requirement cuts weakened in the fourth quarter, but the central bank will continue to maintain a reasonable abundance of liquidity, and monetary policy will remain stable. It is expected that short-term funds will still fluctuate around policy interest rates.
Overall, we judge that the interest rate in the fourth quarter will remain mainly fluctuating. It is expected that the 10-year treasury bond interest rate in the fourth quarter will fluctuate at 2.8%-3.2%, with a high probability of fluctuation of 3.0%, which is basically the same as the current interest rate level.
Main financial market performance
A-share market :
Property tax pilot and coal price intervention to dampen market sentiment, Shanghai Composite Index fell 0.98% to close at 3547.34 points; the ChiNext Index rose 2.00% to close at 3350.67 points. In terms of the industry, power equipment, defense completion, power and utilities, have the highest growth rate, while coal, real estate and home appliances have fallen significantly.
Source: wind
Hong Kong stocks Market:
Hong Kong stocks turned weaker last week, and the technology real estate cycle with a large increase in the previous period fell sharply, while new energy and utilities related to carbon neutrality performed strongly. Hang Seng Index /MSCI China Index /MSCI Southbound Index fell 2.87%/down 4.32%/down 3.21% respectively last week.
industry level, Hang Seng utility led the rise of 3.99%, and under the influence of property tax, Hang Seng real estate construction industry led the fall of 6.08%.
Source: wind
Bond Market:
Last week's bond market sentiment continued to recover, and the central bank increased its open market investment, which greatly stabilized the confidence of the bond market, but optimism did not bring about the continued long force, and the market had differences on the continued nature of the central bank's increase in investment; at the same time, the National Development and Reform Commission's regulatory impact on thermal coal , coal prices plummeted, but pork and vegetable prices resonated and rose, and inflation expectations were difficult to say that they reached their peak, so the bond market only rose slightly by 0.1% last week.
Source: wind
Major asset allocation strategy
A-share market:
Listed companies’ third quarter reports have been announced, and their performance has fallen slightly. The economy still has great pressure in the future. The policy direction needs to be confirmed by the Sixth Plenary Session of the 19th CPC Central Committee and the Central Economic Work Conference at the end of the year.
The overall market maintains fluctuation judgment, paying attention to structural opportunities with superior prosperity and cost-effectiveness.
Hong Kong Stock Market:
At present, this round of rise in Hong Kong stocks is more of a rebound dominated by liquidity factors, but the fundamentals of Hong Kong stocks have not ushered in a reversal point. Whether from the third quarter report of A shares or the domestic macroeconomic, listed companies are facing great pressure on the profit side. Moreover, for Internet companies with a large rebound, the expectations of profit recovery have not yet improved. Therefore, this round of rebound should be topped, so the short-term Hong Kong stock market is neutral and slightly cautious, but the market does not have the risk of a sharp decline.
Bond Market:
The direct reason for the obvious adjustment of this round of bond market is the correction of loose monetary policy expectations. Due to the impact of a sharp rise in commodities and the continued warming of global inflation expectations, the channel for further easing monetary policy has been temporarily closed. The current 10-year treasury bond interest rate has returned to the level before the reserve requirement ratio cut in early July. Considering that the future economic data is still weak, the upward space in the future will not be too high, and is expected to be around 3.0%-3.2%.
This article is from Taikang Xingfu Saying
