20221209-华泰金融控股-Fixed_Income_Bond_market__four_questions_answered_4页_459kb

Bond Market Summary: Four Key Questions Answered

Core Views

The bond market is currently experiencing a situation where "strong expectations" have outpaced "weak reality." Despite the recent RRR cut, the market remains weak due to the impact of pandemic control measures and property policy adjustments. However, after the redemption crisis, short-term opportunities have improved, and adjustments in the bond market may slow down.

• 10Y GB Yield: Has reached 2.9%, indicating improved opportunities.
• Market Outlook: Moderate trading opportunities are expected early next year, with a yield limit of 3.0–3.2%.
• Preferred Assets: Medium- and short-duration credit bonds with high ratings are still the priority.
• Property Bonds: Gains have emerged from property bond investments.

Q1: Why is the bond market weaker after the RRR cut?

The market weakness after the RRR cut is attributed to the following factors:

1. Moderate and Anticipated RRR Cut: The cut was not strong enough to significantly impact market sentiment.
2. Pandemic and Property Policy Changes: These changes have had a more detrimental effect on the market than liquidity adjustments.
3. Investor Behavior: Near year-end, financial institutions tend to retain profits, reducing market activity.

Q2: Will short-term adjustment pause in the bond market?

The short-term adjustment is expected to pause due to:

• Economic and Property Market Recovery: Time is needed for these sectors to return to normal.
• Funds Tightening: No clear signs of further tightening in monetary policy.
• Short-Term Bonds: The 1Y CD rate is at 2.5–2.65%, considered reasonable.
• Long-Term Bonds: The 3.0% yield is a strong resistance level, with 3.0–3.2% as the limit for next year.

Q3: When will opportunities to trade emerge?

Opportunities for trading are expected to arise in January 2023, driven by:

1. PBoC Capital Stability: Likely to maintain stability at the turn of the year.
2. Institutional Pressure: Asset deployment pressures in the early year may increase bond demand.
3. Divergent Expectations: A vacuum period of economic data and eased pandemic control measures may lead to varied market expectations.

Q4: Investment Suggestions

At the current stage, the following investment strategies are recommended:

1. Base Position: High-rated CDs and short-term fixed-rate bonds.
2. Medium-Term Outlook: Long-term fixed-rate bonds are expected to underperform, so short-term trading should focus on expectation differences.
3. Opportunities: Seek opportunities in Tier-2 capital bonds and perpetual bonds.
4. Credit Bonds: Prudent investment in property bonds since late August, with high-rating short- and medium-duration bonds being the priority.
5. Leverage: Investors are advised to restore leverage to a medium level.

Risks

• Home Sales Recovery: Faster than expected.
• Inflation: Higher than anticipated.

Disclaimer

This report is prepared by Huatai Financial Holdings (Hong Kong) Limited and is intended for institutional and professional investors in Hong Kong. It contains the views of analyst ZHANG Jiqiang and is not intended as personal investment advice. The information may be subject to change without prior notice. Huatai and its authors are not liable for any losses or damages resulting from reliance on this report.

Regulatory Disclosures

• Hong Kong: HFHL is regulated by the Hong Kong Securities and Futures Commission.
• United States: Huatai Securities (USA) Inc. is a registered broker-dealer and member of FINRA.
• China: Huatai Securities Co., Ltd. is approved for securities investment consulting.

Contact Information

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