This report is read as follows:
In the environment where exogenous shocks dominate the market, we recommend the 1-5-year China Bond Index with sound returns and sufficient liquidity and the 1-5-year CDB bond ETF of Hua'an China Bond.
Summary:
Since 2022, under the exogenous impact of the market, stocks, commodities and QDII assets have been volatile, while bond products as a whole have been stable; there is a negative correlation between bond assets and equity, commodities and QDII assets, which can effectively supplement the portfolio.
In our review of the macro-economy, we find that the probability of monetary policy tightening is low before the macroeconomic stabilisation. At present, the profit growth of industrial enterprises is negative and continues to decline, and PMI fluctuates near the boom and bust line, we judge that the pattern of low interest rates will continue in the short term, thus bond assets will continue to benefit.
As the representative of government debt, CDB is more cost-effective than treasury bonds and credit bonds. On the one hand, compared with credit bonds, CDB has no credit risk and therefore its income is more robust; on the other hand, compared with treasury bonds, the return of CDB is higher when it also has government credit endorsement.
Since 2020, CDB's bond index has earned an annualized return of 4.27%, which is higher than that of national debt index and credit debt index. From the liquidity level, CDB market stock is large, issuance rhythm is steady, market liquidity is sufficient, coupled with policy support for stock exchanges and inter-bank market interoperability, CDB liquidity is expected to be further improved.
China Bond 1-5 National debt Index (CBA08301), issued by China Bond Financial valuation Center Co., Ltd., holds policy bank bonds issued by the China Development Bank (including poverty alleviation special bonds). The remaining maturity of index position bonds is strictly limited to 0.5-5 years. In principle, the position is adjusted every trading day, which can represent the overall performance of medium-and short-term bonds. From the perspective of the returns of different maturity indices, the index return is positively related to the remaining maturity of index position bonds. China Bond-1-5 China Development Bank bond index annualized return of 3.71%, the maximum withdrawal of-2.66%, Sharp ratio of 1.03, in the middle level of the CDB index of different maturity, can take into account both investment income and robustness.
China Development Bank bond ETF (159649) is the first batch of government bonds ETF in China, which is based on the CDB bond index in 1-5 years. Compared with other bond investment methods, the product has the characteristics of low investment threshold, high transaction efficiency and low investment cost, and will be included in the repurchase pledge bank on November 9, 2022, the liquidity is expected to increase.
Risk hints: quantify model failure risk; market interest rate upside risk
