Comment: Why Is The Monetary Fund With Lower Yields More Favored By Investors?

Pan and Lin (executive dean, Institute of Digital Economics, Zhongnan University of Economics and Law)

Recently, the yield of IMF has dropped sharply. In April 6th, Tianhong balance treasure Monetary Fund 7 annual yield of 1.978%, fell below 2%, which is the first time the monetary fund fell below the 2% yield.

Celestica has more stringent control over the various wind control indexes of the balance treasure than the general monetary fund products, which means that on the way of declining yields, there is no limit to the balance of treasure. In fact, the yield of other monetary funds in the market has generally declined. According to the data disclosed by Alipay's balance treasure, in addition to Celestica's balance treasure, the other 28 monetary funds, Jingshun the Great Wall Jingyi currency A, Bank of China wallet money, Baoying currency A and other 15 funds 7 day yield rate also fell below 2%, the lowest Changsheng Tianbao currency is only 1.64%. According to Wind statistics, as of April 6th, the average annual yield of 7 more than 670 monetary funds in the whole market was 1.96%, of which more than 330 had an annualized yield of less than 2%, accounting for about 50%.

Since the beginning of the year, the yield of IMF has been decreasing. This is related to the further downtrend of market interest rates. Since the beginning of this year, in order to eliminate the negative effects of the epidemic and support the orderly recovery of the entity, the central bank has stepped up its anti cyclical regulation, and has made 3 rounds of reduction. In the past three weeks, 2 successive directional reductions have been made. In addition, the central bank has adopted a series of loose monetary policies such as open market operation, directional reloan and rediscount.

In the case of relatively sufficient money supply, the main investment varieties of national debt, central bank bills, commercial bills and other monetary funds descended, resulting in a decline in the yield of the Monetary Fund. Short-term interest rates are expected to remain at a low level, and the yield of IMF may not rise for the time being.

The proceeds of the monetary fund descend, so is the balance of treasure and other monetary funds still "treasure"? From the historical income data, the Celestica balance treasure also had a yield of around 2% in 2016, but the follow up gradually increased to more than 4%. I believe that the recent decline in the yield of the balance treasure is affected by the epidemic and the economic situation, a phased decline is a normal phenomenon. However, the balance fund and other monetary fund still have value for investors. Mid - and long-term yields may still rise.

In fact, although the "treasure" effect of the balance fund and other monetary funds has declined in the short term, the hedge fund value of the IMF is emerging as the primary choice for investors to avoid risks.

According to the data released by the China Securities Investment Fund Association, as at the end of February this year, the scale of the public offering fund of 16 trillion and 360 billion yuan was 8 trillion and 80 billion yuan, accounting for nearly half. Compared with the size of the end of last year, cargo base increased by 960 billion 552 million yuan in the first two months of this year. As yields continue to fall, the size of the fund has risen markedly.

The reason why the value of hedge funds has been highlighted is that the period when cash is king has probably arrived. The outbreak suddenly brought great impact to the global economy, and domestic and foreign capital markets were greatly affected. Major stock indexes and commodities in the world have dropped considerably, and the traditional hedge assets such as gold have also failed.

This is because the market is expected to be more pessimistic and less investment opportunities. It is a priority for investors to maintain the liquidity and security of assets as far as possible. This not only helps investors to prevent risks, but also helps investors to have "money" to seize future investment opportunities.

Therefore, under the current global financial market's turbulent environment, the monetary fund has been popular. On the one hand, stability has become a major factor in many people's financial management. Although the yield of Monetary Fund has declined, it has a high hedging value as a high return product with high security. On the other hand, monetary fund has advantages in flexibility as well. Moreover, the yield of demand deposits is higher than that of banks. These factors lead to the fact that IMF is more favored by investors in the case of lower yields.

Among the many liquidity management products, priority is given to asset safety and liquidity, that is, risk averse investors. At present, monetary fund is still a better hedge option for ordinary investors. Cash management and financing products such as public goods base, bank cargo base and so on are also relatively good cash management tools. Therefore, the "treasure" effect of balance funds such as balance treasure has not disappeared, and it is still a cost-effective management tool. Of course, if investors want to further increase returns, they can also pay more attention to the stock debt market, and choose excellent varieties of similar assets. For example, the short and medium term debt fund performs well in terms of profitability, security and liquidity.