Analysis on the issue of special local bonds and the use of funds From CICC

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The following is the Analysis on the issue of special local bonds and the use of funds From CICCrecommended by recordtrend.com. And this article belongs to the classification: China’s economy, Brokerage Report.

In 2020, the sudden outbreak of black swan makes the government’s counter cyclical adjustment more urgent, and the importance of stable growth of local government’s special debt is even higher. At present, more than half of the year has passed, more than half of the local special bonds have been issued, and the special treasury bonds have also been issued. So far, how about the issuance of local special bonds? How will the remaining circulation and rhythm change? What areas are bond funds invested in? How about the progress and follow-up rhythm of financial expenditure? These are the concerns of investors. We try to answer the above questions for investors by systematically combing the policies of local special bonds and the situation of tens of thousands of projects supported by special bonds since the beginning of the year.

This year, due to the substantial expansion of special bonds, the supply of local bonds has increased significantly. For the whole year, we expect the net increase in local debt to be about 4.7 trillion. From January to July, the total amount of local bonds issued was 3.76 trillion yuan, with a net increase of 2.85 trillion yuan. Among them, special bonds accounted for the largest part. From January to July, special bonds issued amounted to 2.47 trillion yuan, accounting for 65.7%, while general bonds issued 1.29 trillion yuan, accounting for 34.3%; from the perspective of fund use, new bonds accounted for the majority, with 2.85 trillion yuan of new bonds issued from January to July, accounting for 75.9%, and 9078 trillion yuan of refinancing bonds, accounting for 24.2%, and replacement bonds have not been issued. As for the issuance progress of new bonds, by the end of July, 2.16 trillion yuan of new special bonds had been issued, with a progress of 60.4%; and 563 billion yuan of new general bonds had been issued, with a progress of 57.4%. In terms of issuing rhythm, may is the biggest supply peak of local bonds in the year, with a net increase of 1.17 trillion yuan. From June to July, in order to increase market space for issuing special treasury bonds, the issuance slowed down sharply. We expect that the net increase from August to September will be higher, and the net increase in a single month may reach 450-750 billion yuan, and it will obviously fall back in the fourth quarter.

This year, the long-term trend of local bond issuance is very obvious. From January to July this year, the issuance period of local bonds was further extended. The average issuance period of local bonds was 15.1 years, an increase of 4.8 years compared with that of 19 years. Overall, the proportion of super long-term local bonds of 15 years or above has increased significantly to 46.7%, and the proportion of local bonds with 10 years or more is as high as 80.9%, far exceeding the historical level. In the first half of this year, the overall demand for local bonds was strong, and the bid winning rates of most provinces and cities were basically 25bp higher than the lower limit, and the bid multiple was higher, and the bid multiples of several provinces and cities were more than 10 times. In terms of installment limit, 5Y and 30y local debt demand is the most vigorous.

From January to July, the issuance of local bonds in economically developed provinces is relatively high. Guangdong Province (excluding Shenzhen) has the largest scale, reaching 250.9 billion yuan, accounting for 6.7%, followed by Jiangsu Province, Shandong Province and Sichuan Province, accounting for 6.5%, 6.2% and 6.1% respectively The amount of local debt allocated is higher.

From the perspective of investor structure, commercial banks still play the main role in holding local bonds. The scale of local bonds held by commercial banks is as high as 20.7 trillion yuan, accounting for 86.3%. Among them, national commercial banks account for 72.7%, urban commercial banks and rural commercial banks account for 8.6% and 4.8% respectively. With the long-term issuance of local bonds, insurance companies have significantly increased the allocation of long-term local bonds and custody Data show that insurance institutions have increased their holdings of local debt for seven consecutive months.

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