Financial Services Association, March 1 (Editor Liu Chen) In early trading today, the bond market made a sharp correction, ending 10 days of continuous decline. This pace of operation seems to have long been anticipated by the market. Frontline people say “this is the self-fulfillment of expectations.”

On the morning of March 1, PMI data was released. Performance was divided. The Caixin manufacturing PMI recorded 50.9, up 0.1% from the previous month; the official manufacturing industry recorded 49.1, down 0.1% from the previous month; the official non-manufacturing industry had the most outstanding performance, recording 51.4, an increase of 0.7% over the previous month. After the data was released, interest rates on 10-year treasury bonds rose steeply, from around 2.358% to around 2.372%, up about 2.1 bp from the opening point.

The bond market made a sharp correction, ending 10 consecutive days of decline. Is it time to “retreat”?

However, the impact of PMI data is probably only a small part of the reason.

An institutional trader told the Financial Federation that today the central bank's net investment is only at the level of 10 billion dollars. The market may understand that the financial attitude will return to a precise and tight balance. Today's R and DR prices have also risen by about 3 to 5 bp. Furthermore, according to some market sources, due to the high demand for treasury bonds, especially long-term bonds, the issuance of ultra-long bonds may be increased in the future. While meeting market demand, it is also a reflection of active fiscal policy measures. The trader mentioned above warned that the current position is no longer recommended to be followed up; it is possible to wait for a pullback before buying.

Another trader told the Financial Federation that the Politburo meeting held on Thursday “shocked” the bond market. Interest rates had already risen a bit at the end of the session yesterday. The two meetings will be held next Tuesday. Previously, the relevant two meetings set growth targets and raise the deficit level. At the transaction level, the market has already set prices. Therefore, there is a high risk of continuing the game with incremental benefits. It is possible that the benefits will run out, or even a shortfall that exceeds expectations, so today and next Monday are the time for take-profit trading to retreat.

The absolute level of treasury bond yields is in a state of “de-anchoring”, and the price-performance ratio of equity bonds has reached a historical high

The equity market as a whole came out of recovery in February, and the Shanghai Composite Index rose from 2,680 points at the close of February 1 to 3017.91 points yesterday. While the stock market is strengthening, the bond bullish trend continues at the same time. Based on yesterday's Wind Full A Index mobile price-earnings ratio and 10-year treasury bond yield, the current price-performance ratio of equity bonds is around 2.57, which is already in the historical fraction of 97%.

The chief economist of CITIC Securities clearly pointed out that the recent rise in equity bonds is related to the central bank's expansion. The central bank's total assets have reached a record high of 45.7 trillion yuan in the last two months. Liquidity investment after the expansion determines the trend of stocks and bonds. If invested in an open market operation, the bond market performance is weak; if it is invested with structural instruments such as reloans, the performance of the bond market is weak. Furthermore, the expansion and contraction of the central bank does not accurately correspond to the easing and tension of monetary policy, but the stock market performance shows a high degree of consistency with the pace of the central bank's expansion.

Zhang Jiqiang, chief economist at Huatai Securities, said that currently the absolute level of yield is “unanchored”. The current low interest rate level may have an impact on investment and trading strategies, and once the market adjusts, it will be faster. 65% of investors believe that the high yield on 10-year treasury bonds in the next three months will be close to 2.50%”, while the low point is generally lowered to 2.3%. Compared with January, foreign currency assets such as bonds, stock markets, and US dollars became major types of assets preferred by investors in February, and investors who are optimistic about the “stock market” increased.