021 year is one of the rare years of ups and downs in the history of the credit bond market. Overall, the credit bond market has maintained stability after Yongmei defaulted, and weak-qualified state-owned enterprises experienced recovery after the sharp drop in prices. can be said to be "not broken or established". In terms of section differentiation, whether it is the polarization of interest rate spreads in each province of the urban investment section, the "ice and fire" between state-owned and private real estate companies, or the extreme expansion of the maturity spread of the same main body of coal and steel, multiple sections of the credit bond market have indeed "divided ways".
Annual Strategy Brief Description: For traditional investment institutions, the current heavy-holding sector is still dominated by urban investment, and this sector is also the focus we still recommend. There are certain opportunities for the upstream coal and steel sector to moderately extend the duration. At present, the real estate sector and downstream manufacturing private enterprises have serious differentiation, and the overall sector has little chance, so the investment in the sector still requires special identification of individual securities.
The impact of the secondary market yield brought by Yongmei default has been held with local governments to discuss stability maintenance with hedging , and the upstream industry prosperity combined with the recovery has become the main contradiction in the 021 state-owned enterprise bond market. With the continuous advancement of the consultation meetings of various local governments, the yields of industrial and municipal bonds in various provinces have declined to varying degrees, and the stability maintenance measures are very effective in the short term.
021 has become the year of marginal conversion of the default rate of private enterprises in China's bonds. From the current environment, since the bond issuing entities generally issue bonds in a model where 2+1 or 3+2 is often a typical financing cycle. The rapid increase in the default rate of private enterprises in 2018 to 2019 is the result of the rapid expansion of the bond market in 2015 to 2016 and the "flooding" of liquidity in 2015. Private enterprises that can still maintain normal bond issuance in 2018 under the environment of poor financing for private enterprises, are expected to become the backbone of private enterprises in the Chinese credit market. As the tightening of this round of financing, there are more or less defaults or other credit incidents, which is conducive to the improvement of the market environment.
Currently, the real estate companies that have exposed risks in the market are mostly 7-18 year still predicted that the policy may be loose and adopted radical investment and financing strategies. is facing a series of factors such as the "three red lines" that have become stricter on the balance sheet of real estate companies , and the adverse impact of the fermentation of the Evergrande incident on corporate refinancing. The current real estate industry is facing a special winter. In the severe winter, the previous safety margin of real estate companies is a very big test. The industry will not take too long to clear the clearance. It is about 022-2023, with some real estate companies with obvious shortcomings in their safety margins exiting the credit bond market, the industry's credit fundamentals are expected to be repaired. But in the longer term, according to my country's population plan to reach 70% in 2030, the urbanization process is expected to slow down significantly after 2030, and the overall real estate industry may enter an industry recession as a whole.
State-owned enterprises and private enterprises continue to differentiate. The current market panic in the real estate industry continues to ferment, but overall, only private enterprises have been greatly affected, and the recognition of state-owned enterprises’ real estate market has not been greatly affected. And with the recovery of market sentiment of major entities such as Huafa Co., Ltd., overall, state-owned enterprise real estate is still a relatively safe-haven sector in the real estate industry.
There are currently many differences in the market regarding short-term and long-term coal bonds. We currently recommend moderately extending the duration of to -3 for one year, and to lower the qualifications for large coal companies represented by Shanxi. mainly considers the following aspects: 1. The willingness to repay debts is guaranteed; 2. It is difficult for coal prices to fall sharply next year; 3. The tail risk of industry is controllable; 4. In non-extreme circumstances, the industry's prosperity has little to do with the credit spread .
review of primary market: compared with the same period last year, the net financing scale of credit bonds was almost halved, of which the net financing amount of municipal bonds decreased by 228.6 billion yuan year-on-year. The polarization of urban bond financing in various regions has intensified, and the net financing scale of urban bonds in Jiangsu, Zhejiang, Jiangxi, Guangdong and Anhui ranks among the top five year-on-year, which is relatively favored by the market. In terms of issuance cancellation, the cancellation of issuance in 2021 was concentrated in the first half of the year, and the overall amount of cancellation decreased.
secondary market review review: credit spreads for each term and grade variety narrowed to different extents, and the overall narrowing range of medium and low grades is larger. Among them, the interest rate spreads in urban investment have risen and fallen in a mixed trend, and differentiation has intensified; the interest rate spread of real estate bonds has generally narrowed since this year except for medium- and long-term low-grade varieties, and the narrowing range of short-end varieties is relatively larger; the overall interest rate spread of coal bonds is consistent with real estate bonds, and the overall narrowing of medium- and long-term low-grade varieties is narrowed; the interest rate spread of steel bonds has narrowed overall, and the narrowing range of low-grade varieties is the largest.
Risk warning: industry prosperity fluctuates significantly and policy changes exceed expectations.
main text
1. Overview of the credit environment in 2021
(I) Local government consultations and stability maintenance
Yongmei’s default has become the core variables that dominate the credit bond market trend at the end of 2020. 020htmlOn January 22htmlOn January 1, Liu He presided over a meeting of the Financial Committee and demanded severe punishment of all kinds of "debt evasion and abolition" behaviors. From the end of 2020 to the end of the first quarter of 2021, inertial market smashes of weak-qualified state-owned enterprises and urban investment occurred frequently. The impact of the secondary market yield brought by Yongmei default has become the main contradiction in the state-owned enterprise bond market in 2021. With the continuous advancement of the consultation meetings of various local governments, the yields of industrial and municipal bonds in various provinces have declined to varying degrees, and the stability maintenance measures are very effective in the short term.
With the convening of repeated consultation meetings, many regions' debt repayment intentions that had not been fully expressed were widely conveyed to the market, and the market's investment confidence in weak-qualified state-owned enterprises and urban investments has also been gradually restored. The yields of large state-owned enterprises represented by Tongmei, Hesteel, Tianjin Urban Construction and other entities have declined significantly.
(II) The default of private enterprises is approaching the end of
021-10 html January, a total of 14 defaults in the bond market, including 8 private enterprises. and some defaulting entities such as HNA , Xiangpeng Airlines , etc. are essentially the actual control of the private controller. The total amount of default was 75.919 billion yuan. The defaulting companies and default factors are shown in the figure below.
From the analysis of all defaulting entities in 2021, the decline in profitability is the main reason for defaults in the post-epidemic stage. In addition, the frequent occurrence of problems such as difficulty in refinancing, large debt scale, concentration of short-term debt, and corporate governance are also typical characteristics.
Private enterprise defaults may decrease significantly in the future. The current credit qualifications of private enterprises in the bond market have changed significantly compared with the previous ones. The number of private enterprises in the bond market has dropped from 936 at the highest point in 2014 to more than 634 in 2021. Among the 300 private enterprises that have decreased, nearly 150 have defaulted, and more than 100 have been passively withdrawn from the market due to difficulties in issuing bonds. As weak-qualified private enterprises gradually withdraw from the market, the total amount of defaults in private enterprises has dropped significantly in 2020, and is expected to continue to decline slightly in 2021.
State-owned enterprise default can be fixed, but the confidence of private enterprises is difficult to restore. From the perspective of the default themes of each year, we can find that defaults between subsidiaries of central enterprises and local state-owned enterprises can often rely on the negotiation meeting to repair the confidence of the section. Private enterprises often default on contracts, as weak qualified entities gradually withdraw from the market from the entire sector.
(III) The initial clues of the operating difficulties of the real estate industry
In the second half of 2021, the real estate industry faced a downward trend in various data across the industry under the stricter supervision of the three red lines and the fermentation of the Evergrande incident. The operating difficulties of the real estate industry are beginning to emerge.
Evergrande This year's fermentation of credit risks has had a great impact on the industry: 1. From the financing side, Evergrande's problems combined with industry regulatory policies have led to the active or passive contraction of real estate companies' credit; . From the sales side, Evergrande's leading effect has made some consumers more cautious about the subscription of futures housing, seriously affecting market expectations. With the introduction of a series of policies such as property tax pilot , the real estate industry is still experiencing a credit winter.
According to the analysis of factors of defaulting real estate companies, the four entities that defaulted in in the early years: Huaye Capital, Zhonghong, Yinyi, and Guogou are all related to problems such as the small scale and the simultaneous transformation and expansion. 9-20
Currently, most of the real estate companies that have exposed risks in the market are still predicted that the policies may be loose and adopt radical investment and financing strategies. With the "three red lines" becoming stricter on the balance sheets of real estate companies, the adverse impact of the fermentation of the Evergrande incident on corporate refinancing, and other factors, the real estate industry is currently facing a special winter. In the harsh winter, the previous safety margin of real estate companies is a very big test. , and the industry will not take too long to clear. By about 2022-2023, as some real estate companies with obvious safety margins withdraw from the credit bond market, the industry's credit fundamentals are expected to be repaired. But in the longer term, according to my country's population plan to reach 70% in 2030, the urbanization process is expected to slow down significantly after 2030, and the overall real estate industry may enter an industry recession as a whole.
2. 2. Credit bond market outlook and focus points in 2022
(I) Comprehensive section strategy recommendation
For traditional investment institutions, the current heavy-holding section is still mainly urban investment, and this section is also the focus we still recommend. There are certain opportunities for upstream coal and steel to moderately extend the duration. At present, the real estate sector and downstream manufacturing private enterprises have serious differentiation, and the overall sector has little chance, so the investment in the sector still requires special identification of individual securities. Will there be major adjustments in
(II)?
On August 6, 2021, five ministries and commissions jointly issued the "Notice on Promoting the Healthy Development of the Credit Rating Industry in the Bond Market". The notice mentioned: "A rating method system that can achieve reasonable discrimination can be established and used before the end of 2022 to effectively improve the rating quality." The notice will be officially implemented on August 6, 2022. Therefore, it is highly likely that the external evaluation system may have a certain degree of adjustment within the four months of 2022 from 8html to 12html January, and the yields of primary issuance and secondary markets may face impacts, which is worth paying attention to at that time.
(III) How do you view investment in the real estate industry?
From the current distribution of bond valuation yields among real estate companies, it can be roughly divided into four levels:
The highest level, Evergrande, there are a lot of discussions in the market at present, and the pressure faced in all aspects is also great, so I won't go into details here.
second level , Aoyuan , R&F , Sunshine City , Rongsheng, many high-yield bond institutions have intervened to varying degrees in this level, and the risk level is also significantly higher than that of general investment targets.
third level, Shimao , Rongxin, Jinke , Zhongnan , Greenland, Xincheng Holdings , Sunac and other entities. Currently, there are many special accounts and securities asset management companies pay high attention to it. At present, such entities still have room for value mining.
The fourth level, Country Garden , Xuhui , Greentown , Oceanwide, Longhu , etc. Currently, the market is highly recognized. Most public institutions have holdings for , and most entities have certain safety margins and the risk of substantial default is very low.
(IV) Will the interest rate spread of urban investment continue to differentiate?
is likely to continue, and improvements require consultation meetings and other measures to be introduced.
As of the end of October 2021, the credit spreads in Guizhou, Heilongjiang, Qinghai, Yunnan, Liaoning, Tianjin, Jilin, Shanxi, Guangxi, Shaanxi and other provinces have reached historical extreme values. The reasons behind this are many aspects:
1. Some provinces such as Yunnan have many non-standard defaults, which has led to serious market concerns.
2. The population in some provinces such as Jilin, Liaoning, Heilongjiang and other provinces continue to flow out. The market's recognition of regional recognition is difficult to repair after negative events such as Jilin Trading Investment and FAW Auto .
3. After some provinces such as Tianjin and Inner Mongolia have had problems with economic and fiscal data fraud, the defaulting companies in the region have received high attention and fundamental problems have become more intensified.
The above problems will not be solved quickly in the short term. At present, there are calls for the first order default of urban investment investment in the market, and concerns are becoming increasingly serious. As the largest section of credit bonds, it is difficult to avoid overall, and the final result can only be the continuous differentiation of emotions in the section.
(V) Can the prosperity of the coal industry be maintained?
As a typical mining industry, the coal industry has a high sensitivity to coal prices for corporate profits. There are many differences in the market regarding short-term and long-term coal bonds. We currently recommend moderately extending the duration to 2-3 years, and reducing the qualifications for large coal companies represented by Shanxi, mainly considering the following issues:
. The willingness to repay debts is guaranteed: After the talks, Shanxi Province is still speaking out in public opinion, and will make public statements every January-2 months that it is strengthening bond market discipline and no default is allowed.
. Coal prices will not fall sharply next year: According to Cailianshe, relevant departments are studying the coal price mechanism and comprehensively promoting medium- and long-term contracts. It is expected that all electric coal will sign long-term contracts next year. Further measures will be taken in the future to ensure market supply and avoid irrational rises and falls in the coal market prices again. At present, if the price of thermal coal does not fall to the range of less than 500 yuan, the industry will not suffer the same large losses as in 2015-16.
. The industry tail risk is controllable: The five companies with the lowest credit level in the coal industry are Jizhong Energy , Yongmei, Yu Energy Chemical, Zhengmei, and Jiangxi Energy. These five companies currently have few existing bonds, or their own problems are almost resolved. Overall, the risk of interest rate spread expansion brought about by the industry's tail-break is relatively controllable.
. In non-extreme situations, the industry's prosperity has little to do with the credit spread. can be seen from the figure below. When the industry is in a very low state of prosperity and defaults occur frequently, the credit spread tends to expand significantly. As long as the price of thermal coal does not fall below 500 yuan, the credit spread of the coal industry will often not expand excessively. The price of thermal coal is not the core determinant of the credit spread of the coal industry. Coal prices may fall slightly next year, but it is highly likely that thermal coal prices will not fall to the loss range of coal companies like in 2015-16.
. Analysis of the prosperity of various industries
(I) Urban Investment: Profits recover, debt growth slowed down 3. Analysis of the prosperity of various industries
Operating income and net profit both increased significantly year-on-year. Overall, operating income increased by 21.59% year-on-year, and net profit increased by 15.39% year-on-year. The overall profit performance was good after the impact of the epidemic was weakened, but it showed a downward trend compared with the second quarter's single quarter, and its potential was slightly insufficient. Urban Investment Company's debt-to-asset ratio has increased slightly . Since 2021, regulators have strengthened the management of new working capital loans for urban investment enterprises from the financial institutions. The growth rate of urban investment's debt-to-asset ratio in 2021Q3 was 7.43% compared with Q3 2019, and the growth rate was only 2.1% compared with Q3 2020, showing a significant slowdown trend.
short-term debt repayment ability declined year-on-year. Judging from the median of the monetary capital/short-term debt indicators of various companies in the industry, 2021Q3 decreased significantly compared with the same period in 2020. 61% of companies have this proportion less than 1, and their short-term debt repayment ability is slightly insufficient. Net cash outflows in operating activities have been significantly reduced. is synchronized with the improvement of profitability, and the net cash outflow of operating activities in 2021Q3 decreased by 500 billion compared with the previous year, mainly due to the low demand driven by infrastructure and limited overall project expenditure. At the same time, the net cash inflow for financing also decreased year-on-year, returning to the pre-epidemic level.
(II) Real Estate: Net profit is under pressure, cash flow is relatively tight
net profit declined sharply. Judging from the overall total value of the industry , operating income fluctuated downward overall, and net profit showed a sharp decline year-on-year, down 36.29% from 2020Q3. The decline in profitability is mainly affected by policy factors. For example, the increase in the land price/house price ratio under the large-scale new house price limit, it is expected that the profitability of enterprises may continue to be under certain pressure in the future. The debt-to-asset ratio of real estate companies has dropped slightly. Since the three red lines in August 2020, the real estate industry has begun to leverage
. The debt-to-asset ratio in 2021Q3 decreased by 3.05% year-on-year, which is the general trend of real estate companies in the overall balance sheet reduction .Short-term debt repayment risk accumulation. From the median monetary funds/short-term debt indicators of various companies in the industry, the year-on-year change of in 2021Q3 is not large, and it is down 11.48% compared with 2019Q3. Considering that the scale of restricted funds in the monetary funds account is stable or even rising, the decline in cash that enterprises can use may be greater, and the short-term debt repayment ability is relatively high.
financing capacity declines, and operating net cash flow may be caused by a decrease in expenditure. 021Q3 operating cash flow was 1202.74, a significant increase year-on-year, or due to the weak land market and the reduction in land purchase expenditure of real estate companies; at the same time, due to the tightening of financing for real estate companies by financial institutions, the net cash flow for financing has almost returned to zero, a significant decrease compared with the previous two years, and the cash flow of real estate is generally relatively tight.
(III) Coal: All indicators are improving in all aspects
Operating income and net profit have both increased significantly. coal prices remain high this year, and domestic coal enterprises generally have improved performance. With sales volume increasing and sales prices rising, operating income in 2021Q3 increased by 28.32% year-on-year, and net profit increased by 89.70% year-on-year; negative growth month-on-month is related to the full capacity and a slight decline in coal prices, but it is difficult to change the tight supply and demand pattern in a short period of time. The debt-to-asset ratio of coal enterprises has declined. As profitability increases significantly, coal companies have abundant cash flow to repay their liabilities. The debt-to-asset ratio in 2021Q3 decreased by 0.21% compared with 2020Q3 and 4.04% compared with 2019Q3. The deleveraging effect in the past two years has been significant. (III) Coal: All indicators are improving in all aspects
short-term debt repayment capacity improved year-on-year. From the perspective of the median monetary/short-term debt indicators of various companies in the industry, with the improvement of performance growth, 2021Q3 showed an upward trend compared with the previous two years, and the short-term debt repayment ability increased. 's net operating cash flow doubled, and financing demand weakened. and profitability surged. The net cash flow in operating activities in 2021Q3 achieved a growth of 53.15% compared with the previous two years, which is conducive to strengthening capital reserves to cope with future risks, and also squeezed some financing needs. The net cash flow in financing is generally negative and has shown a downward trend on the previous month.
(IV) Steel: Profits have increased significantly, cash flow has improved
Steel companies' operating income and net profit have increased significantly. is affected by environmental protection production restrictions, and steel production is affected by dual controls and supply is limited. Since July, steel prices have continued to rise. Coupled with the sharp decline in iron ore prices, steel companies' revenue and net profit continue to show a strong upward trend, with revenue growth rate reaching 44.3%, and net profit growth rate is nearly 200%. 's debt-to-asset ratio both decreased slightly from the previous month and year on year. , affected by the positive profits, the capital market of steel companies has improved, the asset growth rate exceeds the debt growth rate, the asset-liability ratio fell by 3.39% month-on-month and 2.52% year-on-year, and the long-term debt repayment ability has improved.
Short-term debt repayment ability fluctuates less. Judging from the median monetary capital/short-term debt indicators of various companies in the industry, 2021Q3 has not fluctuated much compared with 2020. Considering the strong cash flow creation ability and sufficient short-term debt repayment ability. net cash surplus in operating activities doubled, and demand for financing contraction shrinks. is synchronized with the improvement of profitability, and the net cash flow of operating activities doubled in 2021Q3, indicating that the profitability of steel companies has increased significantly, and the overall quality of funds is improving and sufficient. This can also be confirmed by the large outflow of net cash from financing.
4. Review of 2021 rating adjustment: The number of upward entities has decreased significantly, and the number of downward entities has increased significantly
(I) Review of rating adjustment
Due to the stricter supervision of the rating industry and the impact of the epidemic on corporate profits, 2021 has decreased significantly since the beginning of the year, and the number of rating downward entities has increased significantly, and the number of rating downward entities has increased significantly, and the number of rating downward entities has increased for the first time is higher than the number of rating upward entities . As of now, a total of 221 non-financial bond issuing entities were downgraded in 2021, an increase of 85 compared with 2020; 77 were upgraded in 2021, a decrease of 194 compared with 2020.
points to urban investment and industrial entities, and compared with the adjustment of the main ratings in the past two years, it can be found that: . With the stricter industry supervision, the up-rating rating of urban investment entities is more stringent than that of industrial entities. In 2020, the number of adjustments of urban investment and industrial entities exceeded 100, while in 2021, the number of up-ratings of urban investment entities was only about half of the industrial entities' ratings of industrial entities was only about half of the industrial entities. , the upward ratings of urban investment and industrial entities were -83% and -56% respectively; . The urban investment entities changed from the previous trend of "more ratings up and less downward" to "relatively balanced ratings up and downward" . In 2020, the number of urban investment entities was as high as 155, while the downward ratings were only 20. In 2021, the number of urban investment entities was 26 and 57, respectively, and the gap was significantly narrowed. . The main body of the industry is the main force of downgrading ratings . Since urban investment entities have both local state-owned enterprises and public welfare, external support is strong, while the background of the main shareholders of the industry is relatively weak and easily affected by the epidemic, the profit of has dropped significantly. From 2020 to 2011, the number of downgraded industrial investment entities was 116 and 164 respectively, which was far higher than urban investment.
(II) Industrial bond rating downgrades industry distribution
In 2021, there were 164 industrial entities downgraded, an increase of 48 from last year. From the perspective of industry distribution, real estate, construction decoration, comprehensive industries have been downgraded the most.
In the real estate industry, has introduced a series of tightening policies since this year, mainly including: 1. Real estate loan concentration management; 2. Strictly prevent illegal inflow of business loans; 3. School district housing cooling; 4. Real estate tax has been steadily promoted; 5. Bank financing restrictions on real estate; 6. urban renewal prevents large-scale demolition and construction, etc. Against this background, the monthly financing scale of real estate companies has been showing a year-on-year decline since the beginning of this year, and the financing environment has been deteriorating. At the same time, the year-on-year growth rate of commercial housing sales dropped significantly, and the growth rate even turned from positive to negative in the second half of the year. The source of funds of real estate companies was doubled, and coupled with frequent internal risk events in the industry, 27 real estate companies were downgraded in 2021.
In terms of the construction and decoration industry, is affected by the downward economic downstream real estate industry, the profit levels of upstream suppliers of real estate companies have declined or even suffered losses, and their own fundamentals have deteriorated. In 2021, the number of downgraded entities in the construction and decoration industry was 14, second only to the real estate industry.
In terms of comprehensive industry, there are 14 021 rating downgraded entities, and there are many rating downgraded entities, but there are few common factors in rating adjustment, mostly caused by individual factors. The main business of comprehensive enterprises is complex, and there are great differences between different entities, such as Liaoning State-owned Assets, Qinghai State-owned Assets, Panhai Holdings Group, Zhongyuan Asset Management , Chuangchuang Group, etc.
. Review of primary market: The net financing scale of credit bonds is almost halved
(I) Credit bond financing situation: Compared with the same period last year, the net financing scale is almost halved
The net financing scale of credit bonds has decreased significantly year-on-year. Judging from the issuance of , the issuance scale of credit bonds from January to October 2021 was 10.28 trillion yuan, an increase of 116.738 billion yuan month-on-month, slightly higher than the same period in 2020; the net financing scale was 1617.04 billion yuan, a decrease of 1713.043 billion yuan month-on-month. Due to the concentration of repayment due to maturity, the net financing scale was almost halved compared with the same period in 2020. The net financing scale of credit bonds in 2021 is at the central level in the past seven years. From the perspective of the composition of the credit bond issuance end, municipal bonds account for 5% , which is at the highest value of in the past year. Specifically, the issuance scale of municipal bonds from January to October 2021 increased by 699.379 billion yuan compared with the same period last year, while the net financing scale decreased by 228.631 billion yuan year-on-year.
(II) The financing of municipal bonds in various regions: polarization intensifies
021 The polarization of municipal bonds in various regions intensifies. From the perspective of the absolute scale of net financing, urban investment and financing in Jiangsu, Zhejiang, Shandong, Sichuan, Jiangxi and other regions showed a large-scale net inflow, while areas such as Tianjin, Yunnan, Beijing, Liaoning and Gansu showed a net outflow, among which Tianjin was the most obvious, with a net outflow of 8 outflows of 121.5 billion yuan. Judging from the year-on-year changes, Zhejiang, Jiangsu and Jiangxi regions are relatively popular among investors. The net financing of urban investment bonds in the above-mentioned regions increased by 112.3 billion yuan, 46.8 billion yuan and 35.2 billion yuan year-on-year respectively, ranking in the top three.
(III) Cancellation of issuance: The scale of cancellation of issuance in 2021 has decreased
has been cancelled, 021 has been cancelled in the first half of the year, and the overall amount of cancellation has decreased . As of November 9, there were 568 cancellations this year, with a total of 400 billion yuan cancellations, a slight decrease compared with the same period last year. Among them, the first quarter was relatively concentrated, with a total of 188.392 billion yuan cancelled, and the amount of cancelled in May was the smallest, at 2.4 billion yuan. Judging from the disclosed reasons for cancellation of issuance, 67 cases were cancelled due to large market fluctuations, and 13 cases were cancelled because the valid subscription did not reach the issuance scale.
. Review of secondary markets: The credit spread has narrowed overall, polarization has intensified
(I) The overall credit spread has narrowed, and the mid- and low-level amplitude is more obvious
021 Since 1, the credit spread of each term and grade variety has narrowed to different extents, and the mid- and low-level narrowing is larger overall. Due to the impact of Yongmei default incident, the overall credit spread continued to widen at the end of 2020 and reached its peak at the beginning of 2021. Since then, it has fluctuated downward. Among them, the 1yAA variety has the largest decline, reaching 72BP, reflecting that the hot strategic directions of credit bonds have been "qualification sinking" and "short-term collection". From the perspective of quantile level , the historical quantile level of high-grade varieties is lower than that of medium- and low-grade varieties, and the medium- and short-end ends are within 10% level; while the historical quantile of medium- and long-end low-grade varieties is relatively high, at above 80%.
(II) The overall trend of the term spread narrows, and there is even more allocation value in the medium and long term
The overall trend of the term spread among various term varieties has differentiated since this year. At this stage, the maturity spread is still at a high level, and medium- and long-term credit bonds have certain allocation value. Specifically, in terms of the interest rate spread of 3y-1y, the low-level ratings have widened 26BP, and the cost-effectiveness of 1yAA is passively improved; while the medium and high-level ratings have narrowed 7-20BP. The interest rate spread of 5y-3y widened overall, with low-grade varieties having the largest widening range reaching 9BP, while medium- and low-grade varieties having the widening range of 1-6BP. From the perspective of quantile level , the high-grade and low-grade period spreads of 5y-3y and 3y-1y have reached 80% and above, while the period spreads of other varieties are around 50-60% quantile level.
(III) The trend of grade spreads has differentiated, and the spread of medium and high grades has continued to narrow
The trend of grade spreads has been relatively differentiated since this year. Specifically, the credit spreads of medium and high grades narrowed, with an amplitude of between 20-40BP; while the fluctuation range of medium and low grades was relatively differentiated, with the 1y grade narrowing by 25BP, while the 3y and 5y narrowing by 20-28BP. Historical Quantile , the AA+/AAAA grade spread is at a relatively low historical quantile level, both at a historical level of 10% and below; the 3/5y medium and low-grade varieties are at a historical level of more than 90%, reflecting that the market is still evasive about medium and long-term low-grade varieties.
(IV) The interest rate spread of urban investment has narrowed overall, and medium- and long-term varieties are worth paying attention to
This year, the interest rate spread of urban investment has narrowed overall, and the narrowing range of medium- and low-level varieties is relatively large. specifically, the narrowing range of 1yAA(2) varieties reached the largest, reaching 93BP, while the remaining varieties of medium and short-term varieties narrowed by about 30-60BP; the narrowing range of interest rate spreads of long-term varieties is relatively small, about 10-25BP, reflecting that the market is still not optimistic about long-term varieties. Judging from the quantile level, the historical quantiles of short-end varieties are close to the lowest point, all within 5%, the cost-effectiveness is not high, and the medium- and long-end is relatively high, which has configuration value.
(V) The urban investment regional interest rate spread trends are mixed, and differentiation has intensified
Since the beginning of this year, the interest rate spreads of urban investment in various provinces have differentiated, and regional differentiation has intensified . The spreads in some regions such as Yunnan, Guizhou, Tianjin and Heilongjiang have broadened significantly, all exceeding 100BP. In Fujian, Jiangsu, Anhui and other regions, due to the crowding of institutions, the interest rate spread narrowing exceeds 50BP. The historical quantiles of urban investment in the three provinces have reached less than 10%.
(VI) Except for medium- and long-term low-grade varieties, the overall credit spread of real estate has narrowed
Real estate bond spread has shown a trend of narrowing overall this year except for medium- and long-term low-grade varieties, and the narrowing range of short-term varieties is relatively larger. specifically, the short-end varieties have the largest narrowing range of AA+, reaching 38BP; the medium- and long-end varieties have a narrowing range of about 10-30BP except for 5yAA+. From the perspective of quantile level, the historical quantile level of credit spreads for short-end varieties of real estate bonds is relatively low, all above 20%, while the historical quantile level of medium- and long-end low-grade varieties is relatively high, and it has reached its historical maximum, and there is a certain opportunity space.
(VII) Except for medium and long-term low-grade varieties, the overall coal credit spread narrowed
The overall interest rate spread trend of coal bonds is consistent with real estate bonds, and the overall narrowed except for medium and long-term low-grade varieties. Specifically, among short-end varieties, AA narrowing range is the largest, reaching 102BP, and among medium- and long-end varieties, AA+ varieties have a large narrowing range, reaching 63BP; medium- and long-end low-grade varieties have a widening range of 60BP and 94BP respectively. In terms of quantiles, the historical quantiles of low-grade varieties of , 3y and 5y have approached the historical highest point, among which the varieties are all within 50%, and the historical quantiles of 5yAAA varieties are relatively high, and there are certain opportunities.
(8) The interest rate spreads of all types of steel bonds have narrowed, and there may be opportunities for low-grade grades in the medium and long term
The overall interest rate spread of steel bonds has narrowed, and the narrowing range of low-grade varieties has the largest. specifically, the 3yAA level narrows the largest, reaching 106BP, and the 1y/5y low-grade varieties narrowed by 91-92BP. The credit spreads of short-end varieties and mid-end varieties except AA have reached a historical 5% quantile level after this round of narrowing. The cost-effectiveness has been compressed to a relatively low level. The 5yAAA- varieties have relatively high cost-effectiveness, with the quantile reaching 22%, and the credit spread of medium- and long-end low-grade varieties is higher, at a historical level of more than 40%.
See the report released by Huachuang Securities Research Institute on November 17, "Do not break, do not establish, go your way - 2022 Credit Bond Annual Strategy Report"
This article is from Huachuang Bond Forum
