20141029-美银美林-China_rates_chart_book__Surge_in_offshore_holdings_of_CGB_22页_1mb

报告摘要

Summary of China Rates Chart Book: Surge in Offshore Holdings of CGB

Core Content

This document provides an analysis of China's bond market dynamics, focusing on the performance of government bonds (CGB), policy bank bonds, and credit bonds, as well as the regulatory changes and market movements that influenced the market during late 2013 and early 2014. It highlights the impact of monetary policy, investor demand, and liquidity injections on bond prices and yields.

Main Points

Bond Rally and Monetary Policy

Monetary Policy Easing: The People's Bank of China (PBoC) has implemented a series of repo rate cuts, including a 10bp reduction on 14 October 2014, following cuts in July and September. These actions were a key driver of the bond rally.
Liquidity Injection: The PBoC injected CNY1,700bn into the market through Pledged Supplementary Lending (PSL) and Standing Lending Facility (SLF), which helped stabilize money market rates and guide liquidity expectations.
FX Purchase Decline: The PBoC's FX purchase position declined by CNY13.4bn in September, indicating a liquidity withdrawal. This shift has led to the increased use of SLF and PSL for liquidity support.

Investor Demand and Offshore Holdings

Increased Demand: The bond rally was not only driven by monetary policy but also by higher demand from investors, including banks, insurance companies, funds, and securities.
Offshore Investors: There was a notable surge in offshore investors' holdings of CGB, increasing by CNY21bn in September, which accounted for 22% of the total purchases.
Carry Trade Incentives: The higher total returns for bonds and the increased access to onshore markets via RQFII and QFII have encouraged offshore investors to allocate more to CGB.

Yield Curves and Market Instruments

Onshore Yield Curves: Charts illustrate the yield changes for various onshore instruments, including CGB, policy bank bonds, and credit bonds, highlighting the downward trend in yields.
Offshore Instruments: Offshore NDF and CNH instruments are also analyzed, with charts showing forward points and carry spread dynamics.
IRS and CCS: Interest rate swaps (IRS) and cross-currency swaps (CCS) are presented to compare onshore and offshore rates against different benchmarks.

Market Outlook

Constructive Outlook: The report remains constructive on bonds, citing the PBoC's targeted easing policy and the supportive environment for CGB and policy bank bonds.
Issuance Pressure: While there is expected high issuance pressure in Q4, the policy stance and strong investor demand continue to support the bond market.

Key Information

Liquidity Management: The PBoC has been using SLF and PSL to manage liquidity, especially as FX purchases have declined.
Regulatory Changes: Several regulatory changes have been introduced to improve the bond market, including the introduction of RQFII, QFII access to interbank markets, and measures to regulate FX inflows and trade flows.
FX Market Impact: FX forward implied yields and liquidity indicators suggest a shift in market expectations and liquidity provision strategies.
Investor Behavior: Charts show the allocation of CGB by different investor types, indicating a broad-based increase in holdings, particularly from offshore investors.

Regulatory Changes Overview

Date	Regulator	Description
8 May 2012	NDRC	Allowed mainland non-financial companies to sell Dim Sum bonds in Hong Kong.
7 Jun 2012	PBoC	Cut benchmark 1y deposit and lending rates.
28 Jun 2012	State Council	Initiated capital account liberalization pilot in Qianhai.
5 Jul 2012	PBoC	Cut 1y deposit rate by 25bp and 1y lending rate by 31bp.
15 Jul 2012	NDRC, MoF	Reduced market supervision fees and provided clearer guidance for bond market investments.
19 Jul 2012	CIRC	Issued new guidance for insurance companies' bond investments.
27 Jul 2012	CSRC	Revised QFI rules, lowering entry requirements and expanding investment scope.
3 Aug 2012	NAFMII	Allowed non-financial companies to issue asset-backed notes.
13 Nov 2012	State Council	Increased RQFII quota from CNY70bn to CNY270bn.
31 Dec 2012	MoF, NDRC, PBoC, CBRC	Banned local governments from raising funds from the public.
6 Mar 2013	CSRC	SAFE announced new RQFII rules, removing the 20% cap on stock investment.
10 Mar 2013	PBoC	Granted QFII access to the interbank bond market.
21 Mar 2013	SAFE	Required RQFIs to invest within 6 months and hold funds onshore for at least 12 months.
5 May 2013	SAFE	Regulated foreign exchange inflows and bank FX position management.
7 May 2013	PBoC, MoF	Suspended trading for non-financial institutions in the interbank bond market.
5 Jul 2013	CSRC	Approved treasury bond futures trading at CFFEX.
30 Jul 2013	SAFE	Approved $1.49bn QFII quota.
23 Aug 2013	CSRC	Approved steam coal futures trading.
30 Aug 2013	SAFE	Removed currency restrictions on fund remittances.
13 Sep 2013	CSRC	Approved 5-year treasury note futures contract.
27 Sep 2013	State Council	Released the overall plan for the China (Shanghai) Pilot Free Trade Zone.
25 Oct 2013	PBOC	Introduced a loan prime rate system.
31 Oct 2013	SAFE	Increased QFII total quota to $48.5bn.
4 Nov 2013	PBOC	Approved 10 overseas institutions in the interbank bond market.
5 Dec 2013	PBoC, MITCBRC, CSRC, CIRC	Banned financial companies from Bitcoin transactions.
7 Dec 2013	SAFE	Issued Circular #44 to discourage speculative FX inflow.
8 Dec 2013	PBOC	Implemented temporary measures to regulate interbank CDs.

Conclusion

The report underscores the combination of monetary easing and increased investor demand, particularly from offshore sources, as the main factors behind the bond rally. It highlights the role of regulatory reforms in enhancing market access and liquidity management, and suggests a continued positive outlook for CGB and policy bank bonds due to supportive policies and strong investor interest.

展开完整摘要