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Short Term Market Funds Are Tight &Nbsp; Local Debt Issuance Is The First Part Of The Current Standard.

2011/7/12 9:24:00 43

Treasury Bond Interest Rate Financing Bond Yields

On the 11 day, the first batch of local government bonds issued in the year, lack of demand for subscription

Coupon rate

Upstream.

Among them, 3 years of varieties appeared part of the flow label, this is the first time since 2010 local debt issuance issue.

Analysts believe that local debt is cold and short-term market funds are tight, institutional wait-and-see sentiment is still strong direct relationship, follow-up local debt tender situation is expected to improve.

This year's first batch of local debt bidding process can be described as twists and turns.

In June 17th, the Ministry of Finance disclosed the first agency issuance plan for mainland bonds in the year. The first batch of local debt was divided into two varieties of 3 years and 5 years.

The 5 - year varieties were originally planned to be tendered in June 27th, and the 3 - year varieties were planned for tendering in July 11th.

Due to tight market liquidity, tenders for 5 - year varieties were postponed to July 11th and released on the same date with 3 - year varieties.

According to historical experience, the average interest rate of local debt issuance and the same period of national debt is 5 to 10 basis points.

According to the results released by the China debt network, the winning rate of the 5 year local debt is 3.84%, higher than the 5 point treasury bonds in July 8th, which is worth nearly 30 basis points; the 3 year local bond winning rate is 3.93%, and the 5 year period is 9 basis points, and the same period.

Treasury yields

The rate deviation is close to 50 basis points.

In the case of subscription, the 5 year bonds received 26 billion 620 million yuan effective bids, the actual issue of 25 billion 400 million yuan, the bid multiple of 1.05, the 3 year local debt received 23 billion 940 million yuan tender, the actual issue of 23 billion 940 million yuan, the current price of 1 billion 60 million yuan.

Front-line traders said that because of small circulation, poor liquidity, inconvenient financing and difficult sales, local debt pricing has a congenital disadvantage relative to the national debt. In the past, most local debt issuance rates were much higher than the two level market yields of treasury bonds.

From the point of view of comprehensive traders, there are four reasons for the high rate of local bond interest this year: first, the shortage of funds and ammunition.

Guotai Junan Liu Jie pointed out that local debt is not popular due to poor liquidity, and investors are not well-off in recent years. Therefore, the enthusiasm of participating in bidding is not high, especially the participation of joint-stock banks.

Secondly, the medium and short term allocation of institutions is partial saturation.

Changjiang Securities bamboo said that because of the more short-term and medium term bonds in the early stage, the attractiveness of the two local debts was greatly reduced in the tight capital situation.

Also,

Local debt

The price is fuzzy.

Liu Jin, a postal savings bank, believes that although local debt credit is almost comparable to American debt, many institutions are not equally discriminatory, and institutions tend to be vague about the pricing of local bonds and tend to wait and see.

In fact, when the first local debt issue was issued in 2010, there was also a shortage of subscriptions, which led to higher interest rates.

Finally, Guotai Junan analyst pointed out that in the past 2009-2010 years, the local government has greatly expanded the financing scale of various channels, and will reach the peak of maturity in the past two years. The government's liquidation of local financing platform has also increased the risk of refinancing, and the market is concerned about this.

For the 3 - and 5 - year local bonds, the interest rate is reversed, and traders say the main reason is the lack of subscriptions, resulting in the winning bid rate falling to the highest bid position.

For the two sides of the local debt winning rate, the market is clearly considered to have a high suspicion.

Traders revealed that on the first and second half of the day, the yield of the two new debts has dropped markedly.

Market participants expect that the agency will restore rationality in the subsequent local tender, but the interest rate spreads with the Treasury bonds may be larger than in previous years.