In March, the issuance of local bonds slowed down, and Institutions are bullish on the investment opportunities of Penghua CSI 0-4 Year Local Government Bond ETF (159816) and 5-year land debt ETF (159972).

Gelonghui, March 6 | The 5-year local government bond ETF (159972), which set a new single-day trading volume record yesterday, continues to see active trading today. The latest trading volume is RMB 1.001 billion, with a turnover ratio of 24.91%. Another local government bond ETF, the Penghua CSI 0-4 Year Local Government Bond ETF (159816), has even more active trading, with a trading volume of RMB 1.479 billion and a turnover ratio as high as 81.92%. Regarding the recent correction in the bond market, CMB Fixed Income believes that the investment value of local government bonds has increased. On one hand, the yield on government bonds has rapidly declined to a low level, and there is a certain spread between local government bonds and government bonds. Currently, the secondary spreads for most maturities of local government bonds have adjusted to a high level. The issuance volume of local government bonds in March will decrease, which is bullish for the marginal improvement of the bond market environment. The historical percentile of 5-year local government bonds has risen to 85%, making it a good time to consider participating in short- to medium-term local government bonds. On the other hand, as the scale of local government bonds gradually expands, they have become the largest type of interest rate bonds. Additionally, the liquidity of local government bonds has been improving recently. The liquidity of newly issued local government bonds is better than that of older issues, and the participation of non-bank financial institutions in local government bond trading has also increased. For institutions such as insurance companies, local government bonds offer tax advantages. Local government bond ETFs are efficient tools for investing in local government bonds, allowing individual investors to participate more conveniently in local government bond investments and improve capital efficiency through repo financing. Currently, the two largest local government bond ETFs in the market are the Penghua CSI 0-4 Year Local Government Bond ETF (159816) and the 5-year local government bond ETF (159972). The Penghua CSI 0-4 Year Local Government Bond ETF primarily invests in short-term local government bonds, offering low volatility and stable returns, making it suitable for short-term fund management and investors with low risk tolerance. The 5-year local government bond ETF primarily invests in medium- to long-term local government bonds, suitable for duration management and tactical allocation, providing relatively higher return potential with extremely low credit risk.