On November 8, the bond primary market ushered in the first local bond issued in November – the 2018 Sichuan Provincial Government General Bond (12 issues). It is reported that the bidding ratio of this 7-year local bond is as high as 51. Market participants pointed out that although there are many local debt supply this year, this year's bond market is good, coupled with the high cost performance of local bonds, the performance of the primary market has been good. After the high supply and orderly release, local debt is more popular with investors.
7-year Sichuan debt won 51 times subscription
On the 8th, the Sichuan Provincial Department of Finance tendered and issued the 12th government general bond of the province this year (referred to as "18 Sichuan Bond 50"). This is a 7-year general bond with a planned issuance of 4 billion yuan. The results of the issuance show that the current bond issuanceinterest rateIt was 3.91% and the actual issuance was 4 billion yuan. Market participants revealed that the tender ratio of this bond was as high as 51 times.
This is a very high bid multiplier. On the same day, CDB,import and exportThe bank also issued a batch of financial bonds, respectively, of which the highest bidding ratio is a 5-year term debt, with a bid multiplier of 3.46.
Since August this year, the demand for local bonds has been very hot, and the subscription multiples have hit record highs. It is not uncommon to see more than ten times or even dozens of subscriptions. It is worth noting that the third quarter of this year was the peak period of local bond issuance, and the monthly issuance was more than 740 billion yuan. Local debt presents a relatively rare feature of both supply and demand.
Cost-effective high frequency frequency triggered buying
Why are local debts so popular? The analysis believes that there are mainly two factors.
First, the bond market is good this year. Since the end of January, the domestic bond market has quietly gone, and the yield has dropped significantly. In the bull market atmosphere, each variety has a "stage" for better performance.
Second, the local debt is cost-effective, which is the main reason. According to the research report of CICC, since there is almost no credit risk in local debt, and investment in local debt can generally form deposits, the risk weight of occupation is also low, and the yield is significantly higher than that of national debt and policy financial bonds. The price is very high.
More importantly, almost all local debt issues have been issued since mid-Augustinterest rateBoth are 40 bp or more higher than the bidding interval, especially in the economically developed provinces where the floating interest rate was lower. The local debts were very popular after the issue rate was greatly increased. It should be pointed out that the local debts issued by public bidding generally take the 5-day average of the bond yield of the national debts of the same period, which is the lower limit of the bidding interval, which is 40bp above the lower limit, which means that the issuance yield is 40bp higher than the same-term government bonds. The same is true for the “18 Sichuan Debt 50”, in which the target interest rate is 3.91%, which is exactly 40bp higher than the bidding interest rate range (3.51%-4.56%). In addition, another obvious change this year is that the phenomenon of non-bank institutions such as general funds and brokerages participating in local bond bidding has increased, and the diversification of investment groups has further broadened the demand base of local bonds.
It is worth mentioning that since October, the pace of local bond issuance has slowed down noticeably. The current Sichuan debt is the first local debt issued since November and the only local debt issued in the first half of November. As supply pressures ease, there is a favorable change in the relationship between supply and demand, and it is even more strange that local debts cause investors to “buy”.
(Article source: China Securities Journal)
(Original title: up to 51 times subscription local debt has become a hot commodity)