- In the early trading session of the China interbank bond market today, the overall sentiment was moderately positive. The key driving force was the marginal decline in overnight funding rates, which improved market sentiment and led to a 0.3 basis point decline in the yield of the active bond, 260005, to 1.7530%.
- The newly issued thirty-year ultra-long-term special government bond, 2600002, traded at a level of 2.2130%, causing some displacement and switching effects with the existing thirty-year old bond, 260002, resulting in a slight increase of 1 basis point in its yield to 2.2510%.
- The People's Bank of China recently held a credit situation analysis meeting, emphasizing that the credit balance for April needs to maintain positive month-on-month growth. Looking ahead to May, the combined pressure of government bond supply and corporate income tax settlements will be the core macro variables testing the resilience of market liquidity.
Marginal Repair of the Funding Side and Pricing of Spot Bonds
In the early trading session today, the fixed income market's pricing center was primarily influenced by the short-term liquidity environment. As the central rate for overnight rates in anonymous trading sessions decreased, concerns about a tightening funding situation eased, supporting spot bond purchases. Although the Shanghai Composite Index rebounded after bottoming out, triggering a stock-bond seesaw effect to some extent, the yields of government bonds across all maturities maintained a slightly downtrend with a warm attitude. This controlled volatility pattern reflects that, before a trend turning point appears in the macro fundamentals, institutional investors' logic of asset scarcity remains valid, and the demand for bottom-line allocation of long-term and ultra-long-term interest rate products remains fundamentally unchanged.
Micro Adjustments of Ultra-long-term Special Government Bonds
The listing and trading of the thirty-year ultra-long-term special government bond have introduced a new pricing anchor at the extremely steep end of the yield curve. The latest trading price of the new bond, 2600002, is lower than the same maturity China Bond valuation of 2.2420%, indicating the market's pursuit of liquidity premium. However, the new bond's siphoning effect inevitably caused short-term disruption to the old bond, 260002. The switching pressure reported by traders is essentially a tactical adjustment by institutions between duration matching and liquidity management. As long as the overall long-end allocation force does not diminish, the yield spread fluctuations between new and old bonds will tend to converge and will not evolve into systemic selling pressure.
May's Supply and Demand Pattern and Central Bank's Hedging Game
Looking ahead to the bond market next month, the variables leading yield trends will expand from solely the funding side to fiscal and monetary coordination. According to China West Securities' research report, the market in May will face three potential disturbances: First, the concentrated increase in government bond issuance will directly consume interbank excess reserves; second, the People's Bank of China may continue a moderate recovery tone in open market operations, guiding funding rates to return to policy rates; third, corporate income tax settlements will result in the seasonal recovery of fiscal deposits. If the funding side can remain stable amidst the interplay of these multiple factors, holding spot bonds for interest income may have a higher chance of success.
