Source: Bloomberg
Author: Tania Chen, Shulun Huang, Ruth Carson
The People's Bank of China is preparing to open a new bold experiment in the global monetary policy field: the textbooks of the hedge fund are turned out to learn to be short bonds.
Xi Jinping, Supreme Leader, and the high -level mainland government's senior management this week held a five -year session of the Third Plenary Session to formulate plans for future economic development roads.At the same time, the central bank of China is busy borrowing the "hundreds of billions of yuan" in national debt for sale to prevent the formation of bubbles with a national bond market with hundreds of trillion yuan.
The Central Bank of China has been refused to implement quantitative easing measures for a long time, and now it will resort to non -traditional means. It is just an unusual starting direction through transactions directly in the bond market to guide yields.The Central Bank of the Fed and other countries had previously purchased government bonds when the economy was sluggish to lower the yield. However, the People's Bank of China now faces government bonds to a record high, so it is preparing to sell national bonds to guide long -term yields.
The complex and multiple challenges faced by the central bank Pan Gongsheng gave birth to this policy experiment.The Chinese economy, which is in a real estate crisis and a shrinking mud, obviously requires a low interest rate environment; but it cannot be low to affect the profit of the banking industry, which leads to the surge in debt or further weaken the RMB when the US dollar dominates the world.
"In view of the ultimate goal is to achieve economic soft landing, this process will become increasingly difficult to control," Torsten Slok, chief economist in New York in Apollo Global Management, said, "There are too many changes to be unpredictableFactors involve it, and they need to slow down. "
The People's Bank of China has not responded to the evaluation request for the time being.
The more complicated factor that the problem is that the economic slowdown has caused many Chinese stores to do not have much ideal investment options.House prices fell, the stock market performed poorly, and regulators read a tight curse for high -risk replacement investment.
"The stock market is a disaster, and the risk of credit bonds is high, let alone real estate. Overseas investment is limited, and there are risks," Rajeev de Mello, the investment group manager of Gama Asset Management Sa in Geneva, said, "It's really a real thing.Worrying people " All of this result is that the decline in yields seems endless, and the alertness of the People's Bank of China is also born.
First of all, the decline in yields strengthened the market speculation of the central bank that needs to guide the decline in official interest rates, and this is exactly what the central bank is unwilling to do because it is worried that it will further weaken the RMB.China is eager for "strong currency" and hopes to use it to consolidate the status of a strong financial country.
Although low yields can reduce a series of borrowing costs from corporate debt to housing loans, and then support growth, it will only exacerbate the concerns of China's economy in Japan for a long time.
It may be the most worrying of the People's Bank of China that if inflation is re -ignited and the yields are rising, the purchase of government bonds with surge in low yields may cause significant losses.Some investors pay for debt and buy debt. If they have a mismatch with long -term interest rates, they will be risked to financing waste.
Pan Gongsheng said at the Lujiazui Forum last month that the inspiration of the risk incident of the US Silicon Valley Bank is that the central bank needs to observe and evaluate the financial market from a macro perspective, to timely correct and block the accumulation of the risk of the financial market.Essence
Game with the central bank
The market almost ignored the official warnings from the official since the end of April.Instead, investors continue to pursue raising government bonds and have doubts about the prospects of the recent improvement of the economy.
"The central bank and the market game, the high probability market is right," said Chen Kang, deputy general manager of the increasing fund, said, "In the past market reversal is usually through economic improvement, credit risks, and the central bank's tightening currency. These things are short in the short term."
Therefore, the People's Bank of China decided to go straight in a single knife.Since its own balance sheet does not have a suitable scale of bonds, the central bank has arranged to borrow government bonds directly from the first -level dealers for the so -called open market operation.This will allow it to sell bonds in a timely manner to raise the yield from the bottom.
The market is guessing when the central bank will intervene.Bloomberg survey shows that the level of 2.25%of the 10 -year Treasury bond yield is a red line for the central bank. The 10 -year Treasury yield rate is close to this level on Tuesday. Earlier this month, it once reached a record low of 2.18%.
The front page of the financial report of the central bank's financial report said that market participants believe that 2.5%to 3%may be a reasonable range of long -term national debt yields.But returning to this range may not only need the central bank's efforts.
The data released on Monday show that China's economic growth in the second quarter has slowed down to the lowest level since the five quarters, and the export glory has lost the impact of weak consumption expenditure.Donald Trump, a strong US presidential candidate, has threatened to generally raise tariffs on Chinese products. If he enters the White House again, the situation in China may further deteriorate.
The Third Plenary Session of the Council is mainly a political, not a policy event, which means that investors should not expect any specific heavy stimulus measures to introduce the conference.On the contrary, the Politburo meeting at the end of July was the next opportunity window for the government to get rid of shackles to seek the economy.
The risk is that the continuous absence of policy cooperation will make the central bank guide the work of the government bond market.Given that the long -term government bonds in the market are not large, any yield rebound may only provide opportunities for debt cows.
The People's Bank of China data shows that as of the end of May, the balance of the bond market custody was RMB 1.635 trillion, of which the balance of the Treasury custodian was 3.0.4 trillion yuan, most of which were held in the country.The speculative buying of retail investors, the needs of fund managers, and the buying of enterprises to chase high income have helped the rise of government bonds since this year.
Although the proportion of positions in Chinese government bonds in China Treasury has increased since the end of 2023, their position proportion of their positions in May is still only about 7%.Some overseas investors are cautious about the goal of the Chinese Bank of China.
The news that plans to sell domestic bonds "Makes us with a more neutral position," Neraj Seth, chief investor of Berlaide's basic fixed income officer in Singapore, said, "When the central bank wants to re -adjust the yield curve, there is no curvePeople want to block "
But in the view of Carol Lye, the investment group manager of Brandywine Global Investment Management, the rising kinetic energy of Treasury bonds has not disappeared, especially in view of China's economy is still weak.
"There may be some bubbles being formed," she said, "Maybe at some time, we have to leave the game, but now it's not the time."
