The monthly high fell 255 basis points, and the volatility of fixed-income wealt

2024-05-31

"The wealth management product I purchased in the middle of this month has been falling recently, and I'm not sure if I will lose some of my principal after it matures," said an investor with a 30-day holding period to a First Financial reporter. The underlying assets of the 1-month holding period wealth management product purchased from a joint-stock bank's wealth management company are mainly bonds, and the yield has continued to fall after purchase, with losses occurring almost every day.

Since August, the bond market has undergone adjustments, and many wealth management products have experienced net value retracement, especially fixed-income products. In conjunction with this, the wealth management market, which had been growing in scale continuously, has also seen a certain degree of decline. According to market institution estimates, in the past two weeks (August 12th to August 23rd), the 7-day annualized average yield of fixed-income wealth management products fluctuated significantly. The average annualized yield fell by 169 basis points to 0.66% in the first week, and then rebounded to 1.97% in the following week, but it was still 255 basis points lower than the highest point of the month.

The fluctuation in the net value of wealth management products has caused many investors to panic about "breaking the net value." From a comprehensive market perspective, although the net value of bond wealth management products has shown significant fluctuations, there has not been a significant increase in the rate of breaking the net value. However, it should be noted that some products that use leverage to achieve high returns are more sensitive to interest rate changes, which may lead to product losses. In addition, industry insiders believe that despite the negative performance of wealth management product yields affected by bond market fluctuations, the scale of the wealth management market in the second half of the year is still expected to rise above 30 trillion yuan.

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Fluctuations in wealth management yields and scale

"The annualized yield of the half-year wealth management product I have in hand has fallen below 2% in the past month, and the annualized yield of this product for half a year is over 4%," said an investor holding a half-year closed-end wealth management product. Since August, the net value of the wealth management products in hand has fluctuated significantly, leading to a "roller coaster" ride in the yield.

Another investor holding a monthly open product from a joint-stock bank's wealth management also told the reporter that the wealth management product based on the bond product in hand had an annualized yield close to 4% in the past six months, but the annualized yield in the past month has turned negative, "which means that the principal of more than 100,000 can lose a few hundred in a month."

According to data compiled by the team of Zhang Wei, the chief fixed-income analyst at China Merchants Securities, since August, the 7-day annualized yield of wealth management products has continued to decline. From the first week to the second week of August, the 7-day annualized yield fell sharply by 245 basis points to 1.88%, and there was a slight rebound last week, but it was still significantly lower than the average level of August and July.

At the same time, the scale of the wealth management market has also fluctuated. Driven by the bank's interest rate cuts, which have promoted "deposit migration," there was a continuous increase for three consecutive weeks in August. However, last week, the scale of the wealth management market fell to 29.85 billion yuan, a decrease of 0.07 trillion yuan compared to the previous week.

In response to the decline in wealth management product yields caused by bond market fluctuations, many investors have thought about redeeming their products. Industry insiders have said that, based on past experience, short-term fluctuations in the bond market can generally be repaired for investors who hold wealth management products for a long time. At the same time, the transformation of wealth management products to a net value model itself comes with the risk of losses. Looking at the current net-breaking rate, there is no need for excessive worry or "redemption anxiety."

According to the statistical data from Guoxin Securities' research report, as of the week of August 16th, the cumulative net-breaking rate of wealth management company products was 2.65%, still below the risk level. In addition, according to the calculations of the fixed-income analyst team at Huaxi Securities, with the net value retracement of some products, the net-breaking rate of all wealth management products increased to 2.3% as of August 14th. However, compared to the net-breaking rate levels of previous wealth management redemption waves, the 2.3% figure is still not high, and after August 15th, the product net value curve rebounded, indicating that the redemption risk is relatively controllable.However, some analysts have warned that in this round of bond market adjustments, medium to long-duration and high-leverage products have been more significantly affected, while bank wealth management products mostly hold medium to short-term bonds, thus the overall fluctuation range of product net values is controllable. However, some products that achieve high returns through leverage are more sensitive to interest rate changes, and potential net value breakage risks should be vigilant.

Scale growth is still supported

As of the end of June this year, the scale of the bank wealth management market was 28.52 trillion yuan, creating a profit of 341.3 billion yuan for investors, with the number of investors holding wealth management products reaching 122 million, a 6.65% increase from the beginning of the year, and a year-on-year increase of 17.18%. This is only "one step away" from the 30 trillion yuan scale predicted by industry insiders for this year's wealth management market. According to the reporter's understanding, despite recent fluctuations in underlying assets, many market views still believe that 30 trillion yuan is expected.

This year's wealth management market is still affected by the "deposit migration" effect, superimposed with the suspension of "manual interest supplementation" and other factors, the above two factors continue to promote incremental funds into the wealth management market. Wen Bin, the chief economist of Minsheng Bank, pointed out that commercial banks have repeatedly reduced the deposit listing rates, making wealth management more cost-effective than deposit returns, and the "price comparison effect" has promoted the transfer of deposit funds to the wealth management market. At the same time, the suspension of "manual interest supplementation" has accelerated the disintermediation of deposits, providing a "continuous" flow of funds for the wealth management market.

In the view of Ming Ming, the chief economist of CITIC Securities, in terms of bond market investment, while the scale of wealth management is growing, the asset side is facing a huge asset shortage pressure, which will still provide strong support for the short end of the bond market. Under the current bond market adjustment, the asset side of wealth management may shorten the duration, sell long and buy short, and improve defensive capabilities. In his forecast, the wealth management scale in August may increase by about 40 billion yuan month-on-month, and the overall scale of wealth management in the second half of the year may stand above the 31.5 trillion yuan threshold again under the impact of the wealth management company's volume, fully recovering to the high point before the redemption tide.

In addition, although the bond market is currently facing increased regulatory pressure, the market still holds an optimistic attitude towards the future trend of the bond market. The fixed income team of Guohai Securities pointed out in the report that the current economic repair slope is relatively slow, and whether there will be more incremental policies introduced later is still worth paying attention to; institutional behavior and supply and other seasonal factors are likely to be repeated after August this year. Superimposed with the central bank's close attention to interest rate risks, the current 10-year government bond interest rate is in the control range of 2.1%~2.2%.

"The central bank's 'regulation' of the bond market is essentially to suppress demand, reduce market liquidity, and change the supply and demand pattern in a phased manner. In the current economic environment, the People's Bank of China may not intend to raise interest rates significantly, but more to avoid forming a one-sided expectation reinforcement." The fixed income research team of Huatai Securities pointed out.

Ai Yawen, an analyst at Rong360 Digital Technology Research Institute, believes that the recent net value drawdown of bank wealth management products is mainly affected by the fluctuations in the bond market. "Some wealth management products contain leverage, and the drawdown is more obvious, and even losses may occur. However, as the bond market becomes more stable, the net value of some wealth management products that have previously experienced drawdowns is expected to be repaired to a certain extent."

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