Financial Services Association, August 9 (Reporter Cao Yunyi) Treasury bond futures closed down across the board today. After a series of regulatory crackdowns, bullish sentiment has shrunk. The yield of medium- and long-term securities rose across the board, and the 2.5 BP increase in 10-year treasury bond yields hit 2.20%, smoothing the decline since July 26.

Affected by the news, the bond market is relatively weak, and the market believes that there are quite a few capital options to make a profit. The industry believes that the inertial mentality of the bond market may change. All types of institutions are extremely cautious about concentrating on buying bonds in the short term, and it is becoming less and less difficult for sales to dominate. As the cumulative pullback increased, some products that had increased their positions a lot in the early period also began to reduce their positions appropriately to cope with the pullback.

Recently, regulatory crackdowns have continued, and some small to medium financial institutions have irregularities in treasury bond transactions, such as lending bond accounts and transferring benefits. Earlier, the Dealers Association also initiated self-regulatory investigations against 4 agricultural and commercial banks. In response to the CFA reporter, some agricultural commercial banks said that the impact of the self-regulatory investigation on stock prices is limited, and no formal investigation notice has yet been received.

Industry insiders told the Financial Federation reporter that this move sends a signal that domestic finance is maintaining a high-pressure stance against corruption and prevents a small number of institutions from transferring profits through loan accounts and transactions.

The bond market is weak, and yields continue to rise

Today, the bond market continued to adjust. Yields for medium- and long-term products rose across the board, and the yield on active 7-year treasury bonds rose by about 5 bp during the day. The yield on active treasury bonds rose. Among them, the increase in 10-year treasury bond yield of 2.5 BP hit 2.20%, smoothing the decline since July 26, while the yield on active 30-year treasury bonds rose by 2.00 bp to 2.3750%. Treasury bond futures closed down across the board. By the close, 30-year treasury bond futures closed at 111.450 yuan, down 0.230 yuan, or 0.21%; 10-year treasury bond futures closed at 105.945 yuan, down 0.215 yuan, or 0.20%.

Independent financial commentator Guo Shiliang told the Financial Federation reporter that the closing down of treasury bond futures is related to changes in the supply and demand relationship in the market. Changes in the supply and demand structure and changes in market investment sentiment will all affect the trend of treasury bond futures. “As policies change, price volatility will gradually decrease, and treasury bond futures price performance will gradually return to rationality.”

Judging from the news, the Association of Dealers has recently stated that it has handed over some serious offending institutions to the People's Bank of China to impose administrative penalties on some small and medium-sized financial institutions that have committed irregularities such as loan accounts and transfer of benefits in treasury bond transactions. The Clue Dealers Association is stepping up the investigation and processing of other such cases.

A person in the banking industry told the Financial Federation reporter that this move sends a signal that domestic finance is maintaining a high-pressure stance against corruption. “It is to prevent a small number of institutions from transferring benefits through loan accounts and transactions, maintain the normal transaction order in the market, allow the capital market to perform price discovery and resource allocation functions, and promote the high-quality development of the capital market to better serve the real economy.”

“The central bank is paying close attention to changes in interest rates in the treasury bond market, and recently made statements through the media.” Financial policy supervision expert Zhou Yiqin told the Financial Federation reporter that major state-owned banks have done a good job in maintaining financial order and transaction fairness in the treasury bond market, but it is not ruled out that some small and medium-sized banks still have a certain sense of luck due to relatively weak supervision, and have irregularities in treasury bond transactions such as loan accounts and transfer of benefits.

“The action taken by the Association of Dealers once again reaffirms the strict regulation of the rules of the bond market and the attitude of strict supervision and re-implementation by supervisory authorities and self-regulatory agencies. It has carried out a precise crackdown on these illegal small and medium-sized banks, and will later be handed over to the People's Bank of China for administrative punishment.” Zhou Yiqin thinks.

Previously, Jiangsu Changshu Rural Commercial Bank Co., Ltd., Jiangsu Jiangnan Rural Commercial Bank Co., Ltd., Jiangsu Kunshan Rural Commercial Bank Co., Ltd., and Jiangsu Suzhou Rural Commercial Bank Co., Ltd. were suspected of manipulating market prices and transfer of benefits in treasury bond secondary market transactions.

Yesterday, the Financial Services Association reporter telephoned the two banks mentioned above. A relevant person from Changshu Agricultural Commercial Bank said that the notice issued on August 7 to launch an investigation has not yet received an official investigation notice, and the impact on stock prices is limited. A relevant person from the Suzhou Agricultural Commercial Bank said that the bank's main responsibility is not to trade treasury bonds; the investigation had little impact on basic business, and is currently awaiting further disclosure of information.

Subsequent bond market strategies may be adjusted

The market believes that in the future, the Association of Dealers may continue to inspect, and the relevant departments may continue to adjust the regulatory system for various types of institutional debt purchases.

The fixed income department of Zheshang Bank said today that after releasing the news on the restructuring of the bond market on Wednesday afternoon, some more news was released one after another on Thursday regarding the clean-up of bond transactions. The market's expectation that yields will continue to pull back in the short term has increased, and there has also been an increase in micro-level transaction friction.

“All types of institutions are extremely cautious about concentrating on debt purchases in the short term, and it is becoming less and less difficult for sales to dominate. As the cumulative pullback increased, some products that had increased their positions a lot in the early stages also began to reduce their positions appropriately to cope with the pullback.” Zheshang Bank's fixed income said that at present, the microscopic factors that dominate the bond market are still fermenting, and if interest rates continue to be adjusted in the future, the inertial thinking of “buying opportunities every time” is likely to change.

Zhang Kexin, an analyst at the Financial Services Department at Fitch & Co., told the Financial Services Association reporter earlier that in the context of continuing asset shortages and rising yields on long-term treasury bonds, agricultural and commercial banks are still willing to allocate long-term treasury bonds, but the overall scale of financial investment as a share of their assets is subject to regulatory restrictions. The “Opinions on Promoting Rural Commercial Banks to Adhere to Positioning, Strengthen Governance and Improve Financial Service Capabilities” issued by the supervisory authorities in 2019 requires that various loans account for no less than 50% in the agricultural commercial bank's business positioning and financial service capability assessment index. Subject to this indicator, the overall debt distribution space for rural commercial banks is limited in the future.

Looking ahead to the future market, the Zhejiang Business Fixed Income Team said that first, under the underlying logic of “reform” of the Third Plenary Session of the Central Committee and the “increasing pressure for steady growth” set by the Politburo meeting, they can feel the recent increase in the steady growth policy, but the flexibility of fundamentals and weak physical expectations have limited the bond market's large-scale reversal of fundamental logic. Second, from a microscopic perspective, a new round of deposit interest rate cuts has just begun, and interest rates on insurance reservations have been lowered again. The decline in broad-spectrum interest rates is driving more incremental capital into the bond market. Under disciplinary restrictions, bond financing has not increased, and the “asset shortage” logic of the bond market has not changed.