Review: In the first half of the year, the pace of issuance of national debt was normal, and the progress of issuance of local bonds was slow. In the first half of 2024, the cumulative issuance scale of national debt was 5.82 trillion, and the net financing was 1.55 trillion. The overall pace of issuance was normal. Among them, the issuance of ordinary treasury bonds totaled 5.57 trillion, slightly faster than the same period in history. The issuance of special treasury bonds was relatively slow, with a total issuance of 250 billion from May to June.
In the first half of 2024, the cumulative issuance scale of local bonds is 3.49 trillion yuan, and the overall issuance progress is slow, mainly due to the slow pace of new bond issuance. Among them, a total of 1.83 trillion yuan of new bonds were issued in the first half of the year, which was at a relatively low level in the same period of history. The pace of issuance of general bonds and special bonds was significantly slower.
In terms of refinancing bonds, ordinary refinancing bonds issued 1.67 trillion yuan in the first half of the year, the pace of which was basically the same as last year. Special refinancing bonds continued to be issued, but the volume was significantly reduced.
It is not the first time that Henan has recently issued "special" new special bonds for stock projects. Recently, the original raised funds of Henan's sixteenth new special bond were all used to resolve the existing debt, and there was no simultaneous disclosure of "one case and two books". However, there was no local bond issuance of "two cases and one book" before. Since last year, a total of about 362.1 billion yuan has been issued, which is the first time in Henan this year. Among them, the three local bonds issued by Xiamen last year were explicitly used for "municipal stock government investment projects", and we can further focus on whether there will be similar situations in other provinces.
Outlook: The peak of government bond supply in the second half of the year may be concentrated in the second half of August October or August October. (1) In terms of local bonds, the Ministry of Finance has not yet made clear requirements on the pace of issuance of new bonds, and most provinces have not yet completed the mid year budget adjustment. We expect that the rate of new bonds will slightly increase in July, and the issuance will be basically completed by the end of October. (2) In terms of national debt, we assume that the remaining amount of ordinary national debt will be issued at a roughly uniform rate, and in particular, the national debt will continue to be issued smoothly at a single scale of 35 billion to 45 billion. On the whole, the supply of government bonds is expected to gradually accelerate in the second half of the year, but it is expected that there will not be too much supply pressure in the first half of the third quarter. The supply peak may be in August October, and the monthly net financing scale is expected to reach 1-1.2 trillion yuan.
Bond market.
(1) On the supply side, at the end of the third quarter or the beginning of the fourth quarter, the supply of government bonds usually ushers in a seasonal peak, and the net financing scale of government bonds in 2020, 2021 and August October 2023 all rise to nearly trillion yuan per month. (2) On the demand side, or because of the annual profit assessment cycle, allocation institutions tend to stop earning rather than increase allocation after the end of the third quarter.
For the bond market, the "calendar effect" adjusted at the end of the third quarter and the beginning of the fourth quarter has been proved to be successful. At present, the progress of local debt supply is slow, and the trend of accumulation towards the end of the third quarter appears again. This year, the probability of the bond market repeating the "calendar effect" is increasing. The supply materials in the first half of the third quarter are still relatively lacking. The bond market is making emotional savings. With the gradual realization of the cost reduction effect of the bank's debt side in the early stage and the loosening of the bank's debt allocation cost constraint, the yield is expected to be low before the downward impact. In the second half of the third quarter, under the pressure of continuous and concentrated supply of government bonds, the calendar effect of bond market adjustment may repeat.
Risk warning:
The issuance rhythm of interest rate bonds continued to fall short of expectations.
