"I didn't expect that bond funds could also 'trap people'."
"Previously, the bond funds fell so dizzyingly that they lost the gains accumulated over three months in just one day. Fortunately, they have already recovered from the adjustment." After experiencing the "chickens flying and eggs breaking" in bond funds since the end of September, many investors lamented that the decline in bond funds is equally at a loss. However, as the liquidity eased after the National Day holiday, the redemption pressure of financial management eased, and the policy expectations were gradually digested, the bond market's yield fluctuated and fell, and the "egg-laying" "chickens" came back again.
Fund professionals interviewed believe that the main trading logic of the bond market revolves around the policy side. Although the improvement of medium and long-term policy expectations will hinder the continuous decline of long-term interest rates, the market has limited room for significant adjustments under the conditions of eased redemption pressure and the People's Bank of China taking measures to maintain the stability of the bond market.
Bond funds usher in net value repair
As the bond market stabilized after the National Day holiday, the yields of bond funds generally rebounded. Wind data shows that from September 23 to September 30, the 30-year national debt ETF fell by 4.52%, and last week it rose by 1.36%. As of October 16, the 30-year national debt ETF has slightly fallen by 0.2% this week.
The previous "chickens flying and eggs breaking" market made many fund holders still fearful, especially the long-term pure debt funds positioned in medium and low risk suffered the most losses. From September 24 to October 8, Huatai Baoxing Anyue D fell by more than 3%, Changsheng Hengsheng interest rate debt, Guojin Huiying pure debt, Wanjia Xinjing pure debt and other 23 medium and long-term pure debt funds fell by more than 2%, and there were 330 medium and long-term pure debt funds that fell by more than 1%. During this period, there were medium and long-term debt funds that fell by 0.6% and 0.8% in a single day, and fund holders watched the "chickens flying and eggs breaking", and in just a few days, they lost the gains made in the previous few months. For example, on September 27, Guojin Huiying pure debt fell by 0.72%, and on September 30, the decline reached 0.84%, and the fund continued to rebound in the following two trading days.
However, after the National Day holiday, the above funds generally rebounded, such as Huatai Baoxing Anyue rebounded by 1.6%, but the net value of most funds has not yet recovered the losses since the adjustment in late September.
In terms of medium and short-term debt funds, the decline was relatively limited before, and with the recent market recovery, the net value of some medium and short-term debt funds has recovered and reached a new high.
It is worth noting that the investment in urban investment bonds has been hot recently. Many market insiders told reporters from China Securities News that the transaction of urban investment bonds has been very active recently. With the Ministry of Finance's package of fiscal incremental policies releasing positive policy signals, the transaction of urban investment bonds has become hot again, and high-coupon high-rated urban investment bonds have once again become "hard to find".
After the previous round of adjustments, since October 10, the Wind high-yield urban investment bond index has continued to rebound. The urban investment bond ETF continued to rise, with increases of 0.94%, 0.13%, 0.46%, 0.12%, and 0.02% on October 10, October 11, October 14, October 15, and October 16, respectively.Redemption Pressure Gradually Eases
Since September 24th, the "stock-bond seesaw" effect has been quite pronounced, with the stock market rebounding rapidly and the bond market undergoing a sudden adjustment. Regarding the performance of the bond market, institutional investors believe that, on one hand, a series of significant policy releases have been favorable, enhancing market risk appetite; on the other hand, the "stock-bond seesaw" effect has triggered a short-term liquidity imbalance, leading to fluctuations in bond valuations.
From the perspective of institutional behavior and market sentiment, a representative from Chan Long Assets told China Securities Journal, "Around the National Day holiday, due to redemption pressure, a large number of bonds were sold by trading desks dominated by securities firms and bond funds, leading to a significant increase in the demand for capital inflows. However, since last Friday, bond funds have once again turned to net purchases of bonds, indicating that redemption pressure is gradually easing."
Regarding the credit bond market, which was previously adjusted due to "precautionary redemptions" by wealth management products, the core issue, according to Chan Long Assets, is that credit spreads have been too narrow, resulting in significant impacts on long-term credit bonds and low-grade municipal bonds. Although the fundamental of asset scarcity remains unchanged, external factors such as policy adjustments have added more uncertainty to the market, exacerbating the volatility of related products.
Guotai Asset Management also stated that after the National Day holiday, the yield of interest rate bonds has stabilized, while credit bonds have been affected by redemption pressure. At the same time, in the equity market, the large scale of bank transfers has led to the need for banks to prepare liquidity, with the capital market remaining tight and the impact of reserve requirement ratio cuts not yet apparent. In addition, under the influence of the "stock-bond seesaw," wealth management products face significant redemption pressure, with funds net selling bonds, leading to adjustments in the bond market, especially in credit bonds. Interest rate bonds are mainly influenced by proprietary funds.
Yongying Fund believes that with the implementation of a series of policy combinations in September, the market's expectations for policy stimulus have undergone a readjustment of risk appetite, and redemptions of wealth management funds have also led to significant changes in liabilities, triggering a certain domino effect and causing the bond market to weaken. However, considering aspects such as trading congestion, liquidity, economic expectations, and market sentiment, the current bond market risks differ from past "bond disasters," and the probability of a stampede-like redemption is relatively small.
The Market is Expected to Stabilize
Looking at recent market performance, the interest rate bond market has taken the lead in stabilizing, and institutional investors believe that this round of bond market adjustments may be nearing an end. Regarding the performance of interest rate bonds in the future market, Guotai Asset Management believes that as the equity market shifts to a fluctuating adjustment, interest rate bonds will stabilize first, with long-end and ultra-long-end performances being better. A representative from Chan Long Assets stated that it is expected that the main trading logic of the bond market will further revolve around policy, and improvements in medium and long-term expectations will pose certain obstacles to the downward movement of long-end interest rates. With redemption pressure easing and the People's Bank of China taking corresponding measures to maintain market stability, the adjustment space is limited. In the short term, one can first seize the opportunity of the capital market becoming more relaxed, with the certainty of medium and short-term yield declines being stronger, and subsequently, it is necessary to pay attention to whether the scale of fiscal policy exceeds expectations and its impact on the capital market.
In terms of credit bonds, Chan Long Assets stated that in a volatile market environment, compared to strategies of credit sinking, extending duration, and increasing leverage, adopting a strategy of credit variety mining and right-side high-position allocation is wiser and more prudent. Municipal bonds already have a certain configuration value, and the high-level attention to debt resolution not only helps alleviate liquidity and debt pressure but also enables the spreads of medium and short-term low-quality municipal bonds that have fallen out of investment value due to bond market adjustments and liquidity shocks to narrow rapidly. However, it is still necessary to closely monitor whether the specific scale of fiscal increments exceeds expectations and the continuous progress of wealth management product redemptions.
Specifically, some market participants suggest that, considering the relatively weak liquidity of bonds such as private bonds and perpetual bonds, which show certain resistance to price drops in a volatile market, especially industrial bonds, it is important to focus on medium and high-grade varieties under the background of continued asset scarcity. For industrial bonds, it is necessary to deeply explore state-owned enterprise varieties in high prosperity and stable industries, and increase allocation during adjustments of high-quality entities to obtain better returns. For real estate bonds, it is necessary to continue to pay attention to policy intensification and fundamental changes. When financing for real estate state-owned enterprises is smooth, the cost-effectiveness of medium and high-grade medium and short-term state-owned enterprise bonds will be enhanced. At this time, it is important to pay attention to and seize configuration opportunities, while also being cautious about the risks of credit sinking.
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