On June 17th, the first batch of 50-year special government bonds entered the distribution phase. Some banks that initially sold these special bonds to individual investors did not continue to open sales channels for personal investors. According to the First Financial Daily reporter, this change in the distribution situation is related to the relatively low issuance interest rate. The yield to maturity for the 50-year special government bonds is 2.53%, which is inverted compared to the previous 30-year variety.
According to a June 14th announcement from the Ministry of Finance, the 2024 ultra-long-term special government bonds (third issue) had completed the bidding process on that day. The planned issuance amount for this bond issue was 35 billion yuan, with the actual issued face value amounting to 35 billion yuan. The term of this bond is 50 years, with the coupon rate determined by bidding at 2.53%. Interest begins to accrue from June 15th, 2024, and distribution took place from the end of the bidding on June 17th until June 19th, when the bonds started trading on the market. These bonds are fixed-rate interest-bearing, with interest paid semi-annually on June 15th (postponed on holidays, same below) and December 15th each year, with the principal and the last interest payment due on June 15th, 2074.
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On the 17th, a First Financial Daily reporter, posing as an investor, inquired about the purchase of the aforementioned bonds from a customer service representative at Zheshang Bank. The representative stated that the bank had not yet received any sales notices for the 50-year special government bonds, but usually, they would receive such notices in advance. From internal notices mentioned by some account managers to their clients, after the issuance interest rate for the 50-year special government bonds was announced last Friday, the bank, considering the market price fluctuation risks of government bonds and the risk tolerance of clients, decided to temporarily suspend sales to individuals in order to protect the legitimate rights and interests of consumers. Before the bidding interest rate was announced last Friday, an account manager at the bank had indicated to clients that the bank would continue to sell the new ultra-long-term special government bonds to individual investors on Monday, the 17th, with a term of 50 years.
On Monday, a staff member at a Beijing branch of Zheshang Bank stated that due to interest rate and other reasons, the bank decided temporarily not to sell (to individuals). A staff member at a Beijing branch of China Merchants Bank also stated that they had not yet received a sales notice for this type of bond, and they were waiting for specific arrangements from the head office.
In the morning of the 17th, the reporter checked the mobile banking of Zheshang Bank and did not see any ultra-long-term special government bonds available for purchase during the subscription period. The "Newly Issued Bonds" section of China Merchants Bank's mobile banking had displayed the 50-year special government bonds (24 Special Government Bonds 03), a type of book-entry government bond, but the maturity annualized yield was shown as 0.00%, with the purchasable share shown as 0 shares, and by the afternoon, the relevant information had been taken down. In response to this, a customer service representative from China Merchants Bank stated that the bank had received a notice not to participate in the distribution of this 50-year ultra-long-term special government bond to retail customers, and the product information would also be removed from mobile banking.
Looking back, this is the third issue in this year's trillion-yuan special government bond issuance plan and the first time the 50-year variety has been issued. The first two issues were 30-year and 20-year varieties, respectively. Among them, the 2024 ultra-long-term special government bonds (first issue) (30-year term) were initially issued and subsequently issued by tender on May 17th and June 7th, with issuance amounts of 40 billion yuan and 45 billion yuan, respectively. The winning bid rate for the former was 2.57%, and the latter was determined by tender at a reissue price of 100.95 yuan, equivalent to an annual yield of 2.53%. The 2024 ultra-long-term special government bonds (second issue) (20-year term) were first issued on May 24th, with an issuance amount of 40 billion yuan, and the winning bid rate was 2.49%.
Regarding the first batch of 50-year special government bonds having a lower yield than the 30-year term, market analysis suggests it is related to the high subscription enthusiasm from institutions and is also seen as a manifestation of institutional funds extending the duration in the context of an asset shortage and continuously declining bond market yields. According to the Ministry of Finance, the total issuance amount for this bond issue is 35 billion yuan, with the coupon rate determined by competitive bidding by the underwriting group at 2.53%, with a full bid multiple of 5.38 and a marginal multiple of 1.03.
In comparison, the subscription multiples for the previous 30-year special government bonds were 3.9 and 4.25, and the full bid multiple for the initial issue of the 20-year special government bonds was 4.34.
Some institutional sources believe that the lower-than-expected winning bid rate for the 50-year special government bonds may also disrupt the secondary market's pricing of the yields for 10-year and 30-year government bonds. There is a possibility of significant volatility in the subsequent trading, which is also an important reason for banks to be cautious in selling to individual investors.
Previously, media under the central bank's jurisdiction emphasized that whether it is purchasing ultra-long-term special government bonds or other book-entry government bonds, investors need to be aware of investment risks. The trading price of book-entry government bonds will fluctuate with the market, and investors may gain trading profits due to price increases after purchasing, or they may face the risk of losses due to price decreases. The Ministry of Finance has also emphasized that individual investors should have certain investment experience and risk-bearing capacity for book-entry government bonds that are not intended to be held to maturity but are aimed at trading profits.On the other hand, as the yields on medium and long-term government bonds continue to decline, market expectations for bond market speculation are also changing. When will the yields on long-term government bonds return to a reasonable range, and whether relevant departments will sell government bonds when necessary are issues of great concern.
Previously, the central bank has made multiple statements regarding the buying and selling of government bonds. In late May, the central bank's media outlet stated that if the yields on long-term government bonds continue to fall, it is not a good time to buy. Conversely, if a large amount of bank deposits are diverted to the bond market, and the demand for risk-free assets further increases, the central bank should sell government bonds when necessary.
Since the beginning of 2024, the yields on medium and long-term bonds in our country have declined significantly, with the yield on 30-year government bonds falling below 2.5%, and the yield on 10-year government bonds once hitting a 20-year low. Looking at the latest performance, as of the reporter's deadline, on Monday, the yields on active 10-year and 30-year government bonds continued to fall, down 0.7 basis points and 0.65 basis points respectively, reporting at 2.288% and 2.5225% respectively. Some market participants have pointed out that, judging from the normal operation of the market in recent years, a range of 2.5% to 3% may be the reasonable range for the yields on long-term government bonds.
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