Economic Observer reporter Cai Yuekun Jiang Xin "We lost hundreds or thousands of yuan a day, which was more than we earned at work. We asked the bank to open the redemption channel in advance, and now we hope to stop losing and redeem the financial products as soon as possible."
On December 14, 2022, Gaoxin Road, Yanta District, Xi'an City, the head office business department of Bank of Xi'an Co., Ltd. (hereinafter referred to as "Bank of Xi'an"), an investor who purchased the bank's financial products, came to communicate with the relevant staff of the bank.
More than 100 holders of financial products on the scene also raised similar demands. The reporter of the Economic Observer learned that most of the financial products in the hands of these investors have not expired, but because the net value of these products has fallen more recently, they hope to redeem them in advance. For example, an investor holding Bank of Xi'an's "Profit Gathering and Annual Earnings 364A" product, the 7-day annualized yield fell by 36.24%.
A similar decline is common in financial products of many banks. One investment in financial products of Bank of Xi'an said that he also bought Shanghai Pudong Development Bank's six month fixed opening W financial products. Since November 15, the net value of the last month has dropped from 1.0768 to 1.0672. The investor has purchased nearly 370000 yuan, and the current loss is more than 5000 yuan.
The net value of bank financial products has been falling ceaselessly. Many investors who were used to the stable income of this type of products chose to redeem. According to the reporter, the net value of wealth management products of many large banks also experienced a correction, which led to the redemption of individual investors. Investors have obviously not adapted to the volatility risk after the bank's financial management has been netted.
Since late November 2022, bank wealth management, public funds and other institutions have reduced their holdings of interest rate bonds and credit bonds, forming a "trample market", leading to the decline of bond prices, the decline of bank wealth management and debt genes and net worth, leading to institutional and personal redemption; Bank wealth management and debt base can only cope with debt dumping, and the bond market continues to decline, forming a vicious circle. Bank financing also suffers from redemption.
According to Li Dong, a bank bond trader, if a bank's financial subsidiary fails to sell a good price when reducing its holdings of credit bonds, it will continue to lose money in terms of the net value of financial products. When ordinary people see that their financial holdings are constantly losing money, they are prone to panic and trigger a wave of redemption. How long will the negative feedback effect of the new round of "redemption, asset sales, net worth decline, more redemption" of bank financing last and become the focus of investors' attention.
In Li Dong's view, in December, institutional investors in the bond market entered a round of "irrational" selling of bonds. In the eyes of some institutions, bonds with high cost performance have gradually emerged. On December 15, a chief investment officer of small and medium-sized insurance enterprises told reporters that when the market fluctuated greatly and there were big differences, there were often opportunities to enter the market. At present, the position size is being appropriately increased.
The tide of redemption continues
"XX Bank lost more than XX Bank" "Who has XX Bank group, please help me"... On December 14, in a bank investor's WeChat group, the exchange of financial losses became a hot topic.
On December 14, at the business department of the head office of Bank of Xi'an, the relevant staff of the bank said that investors who have financial claims for early redemption signed the "Information Registration Form" on the spot, which mainly includes holding products and amount, and then the staff will contact for handling.
A staff member of Bank of Xi'an in charge of product investment related business said that the withdrawal of the bank's wealth management product net value was mainly due to the recent rise in the yield of investment bonds, which led to the loss of bond prices. Most bank financing of Bank of Xi'an is mainly configured as credit bonds, and the subdivision type of credit bonds is mainly configured as urban investment bonds, which can guarantee the nominal income. In addition, the wealth management products are also equipped with interest rate bonds to ensure the liquidity of the products.
The person said that different investors have different buying time points, so the position losses are different. However, the net value of Bank of Xi'an's financial products since their inception is still more than 1. At present, the team in charge of the bank is also looking at the market every day to formulate relevant countermeasures against market changes, such as whether to sell assets or not.
Following the redemption tide in November, the pressure on bank financial redemption has not eased since December.
Wind data shows that as of December 16, the yield of three-year AA+urban investment bonds has risen rapidly from 3.13% on November 15 to about 4.4%; The yield of AAA urban investment bonds was only 2.8% on November 15, and has now reached 3.25%.
After the accelerated sharp decline in mid November, the bond market has stabilized for more than a week, and recently began to decline again. Redemption is the main source of pressure for these two rounds of market adjustment.
Guosheng Securities Research Daily pointed out that, from the perspective of institutions, unlike the previous round of public offering, which was dominated by wealth management and securities firms' asset management, this round of share reduction mainly came from bank wealth management. In the four trading days from December 1 to 6, wealth management reduced cash bonds by 105.9 billion yuan in total, and the speed of share reduction did not slow down compared with the previous round. However, most of the time in this round of public funds increased their holdings, which is different from the previous round of public funds that reduced their holdings by nearly 100 billion per day. Although the public offering on December 6 reduced its holdings by 31.5 billion yuan, the sustainability of the main reduction in interest rate bonds remains to be seen.
Li Dong said that in general, interest rate bonds and local bonds are the main types of bank proprietary allocation. The broad funds such as bank wealth management, fund, insurance asset management, brokerage asset management, trust and futures asset management are mainly credit bonds. Among them, bank financing is mainly to allocate high-quality credit bonds. "In the context of the redemption boom, some bank financing subsidiaries were forced to sell bonds, which were the chips of bank financing. At this time, for insurance asset management, securities dealers and other institutions, the chip yield is high and very attractive." Li Dong said through analysis.
According to the data of China Financial Network, as of December 15, 2022, more than 5000 bank financial products in the duration of public offering financial products have broken the net, that is, the unit net value is less than 1, that is, there is a book loss.
A banker said that from the perspective of the financial product contract, the bank's financial products that have not expired cannot be redeemed in advance, and the bank has the right to refuse the customer's request for early redemption. From the perspective of supervision, banks are not allowed to redeem financial products in large quantities for customers in advance. However, in case of special needs of individual customers, such as serious illness and urgent need for money, the bank may open redemption channels or coordinate the transfer of financial products held by the customer.
Selling transferred to credit bonds
Since December, Li Dong has felt the "irrational" dumping of bonds by institutional investors in the bond market, which has been transmitted from the interest rate bond market in late November to the current credit bond market.
With the rise of interest rates, the bond market is still in a downward trend. Li Dong said that under the pressure of redemption, institutions such as bank financing subsidiaries had to sell bonds in their positions. Since late November 2022, interest rate bonds with good liquidity and interbank deposit receipts have been sold first.
According to the data of Guosheng Securities Research News, interest rate bonds and credit bonds were significantly reduced in the last round of public offering redemption. In the near future, the main subject of reduction is financing, and the main objects of reduction are credit bonds and bank perpetual bonds (collectively referred to as secondary capital bonds and perpetual bonds issued by banks). Since the beginning of December, bank financial management has reduced credit bonds by 45.6 billion yuan, with a daily average of more than 10 billion yuan. The net reduction of "others", mainly Eryong bonds, is 50.8 billion yuan, with a daily average of 12.7 billion yuan. Compared with the previous round of public offering led reduction, this round is more concentrated in securities.
Li Dong said, "When there is no way to sell the assets held by institutions, some banks' financial subsidiaries and other institutions further began to sell credit bonds, especially the urban investment bonds with relatively good liquidity. Those that can be sold should be sold first, while those that cannot be sold can only be sold last."
The fund manager of a large public offering fund told the reporter that the bank's financial products were facing redemption recently, which brought obvious negative feedback to the market and caused a liquidity run. The bond market is similar to the stock market liquidity crisis in 2015. It has nothing to do with the pricing of the entire bond market, but the fluctuations caused by trampling.
Li Qilin, the director and chief economist of Hongta Securities Research Institute, said that the current bond market, especially the credit bond market, secondary capital bonds, perpetual bonds and interbank deposit receipts, has seen an obvious rise in yields, and has fallen into a "selling tide".
Compared with the interest rate, Li Qilin said that the impact on credit is greater for two reasons: first, the liquidity of credit bonds is not as good as the interest rate. When products are collectively redeemed, the investment manager has to "increase the transaction", which is more obvious in low - and medium rated, long-term credit bonds, otherwise they cannot be sold; The second is that interest rate debt has fallen deeply. For example, the self operated and insurance institutions of large banks that are less affected may not be able to pass the risk control of large banks and insurance companies. There is no large institution with stable liabilities that can take over the medium and low rated credit debt.
Insurance funds and other institutions began to receive orders
In the face of the "irrational" bond dumping market, the fund managers of the above-mentioned large public funds believe that institutions should adjust positions according to their own research and judgment. For example, some bonds that feel cost-effective should be increased in duration or position; If there is pressure for further redemption, it should be to reduce positions or wait for a while to add positions.
The person further analyzed that the public fund was relatively passive in this situation because the liability side was not stable. The liability side of insurance funds is very stable, but some institutions may not have sufficient funds. The liabilities of pension and annuity are relatively stable, and there is no pressure to redeem them. Theoretically, we can continue to increase our positions.
The chief investment officer of the above-mentioned small and medium-sized insurance companies told reporters that when the market fluctuates greatly and there are big differences, there are often opportunities to enter the market. At present, the position size is being appropriately added.
In addition, in the face of the redemption pressure of bank financing subsidiaries, some insurance practitioners believe that this is actually a good time to show the stability of the insurance industry's income. As one of the few newly paid products after the new asset management regulations, financial insurance products have become more and more robust in the insurance industry, but the relatively conservative investment side makes this advantage not obvious. There are many products whose settlement interest rate of universal insurance exceeds 4%. In the current investment environment, it is good to reach 3.5% settlement interest rate. Many products still have a minimum guarantee of 2.5%. However, the insurance company's own financial marketing ability is insufficient, and its long-term asset liability matching advantage has not been played well.
In addition, the chief investment officer of the above-mentioned small and medium-sized insurance enterprises said that some time ago, there was market news that the central bank required large insurance companies to increase their positions. Although there has been no official voice, insurance companies have acted frequently recently, especially since this year or since November, almost all of the allocation of 30-year bonds is insurance funds.
Guosheng Securities said that the current interest margin of the two permanent bonds has risen to a high level, which will increase the attractiveness of allocation and attract market institutions to increase allocation. As of December 6, the five-year yield of bank secondary capital bonds reached 3.70%, and the interest margin with CDB reached 78BP (basis points), which has risen to the historical quantile of 65%, close to the interest margin in October last year and April this year. This will increase the attractiveness of public funds and bank proprietary allocation.
Guosheng Securities believes that the redemption funds have not flowed out of the bond market, and some of the funds for retail investors to redeem wealth management may return to the bank statement, forming bank deposits. When the loan is insufficient, the bank will give it to other institutions through repo and other means, and may also increase bond investment, so it still flows into the inter-bank market and the bond market. With the rise of the interest margin of the two permanent bonds, the public offering and bank on balance sheet may increase the allocation to stabilize the market. From the spot bond data, since November 21, public funds have accumulatively increased their holdings of "others" by 56.6 billion yuan.
Netting test
"After the end of the transition period of the new asset management regulations at the end of 2021, the bank financial management market is facing the first big test since the real comprehensive net worth transformation." Li Dong said that the investors of bank financial management were used to the expected return type before. After the net worth transformation, the investors took their own risks, and the loss of money brought them great doubts. The net worth management of the bank wealth management market requires time for investors to accept and adapt.
On December 14, when several investors holding unexpired financial products of Bank of Xi'an requested to redeem the products in advance, they signed an Application for Redemption of Net worth Financial Products, which stated that: I knew that the product I purchased was a "value based financial product", "no capital protection, no interest protection, and the net value of financial products fluctuated with market conditions". At the same time, it is also known that "this financial product does not provide the function of investors' initiative to initiate full or partial redemption, and investors' confirmed product shares are agreed that the system will automatically initiate full redemption on the expiration date of the investment cycle".
Many investors said that they can accept the losses incurred since the investment products, and now they hope to redeem the stop loss in advance. Subsequently, on December 15, many investors who applied for early redemption of Bank of Xi'an's wealth management said that "APP shows that the account has been received".
The reporter has repeatedly called the contact information disclosed in the Bank of Xi'an semi annual report on the above situation, but no one has answered.
On December 11, the official micro blog of the wealth center of Bank of Xi'an released a letter from Bank of Xi'an to financial investors, saying that after the release of the new asset management regulations, the bank's financial products have undergone a net worth transformation, and the changes in the net value of financial products directly reflect the changes in market conditions. Looking at the range and speed of this adjustment, it is rare in the history of the bond market, which also led to temporary fluctuations and corrections in the same type of net worth wealth management products in the market.
In the letter, Bank of Xi'an said that after the release of sentiment in the bond market, the future is still full of hope. In anticipation of the gradual return of the market to fundamentals, we timely adjusted the product portfolio structure, managed liquidity well, and strived for space for subsequent value mining.
Purdue Standard believes that the two rounds of bank financial management have helped investors understand the nature and characteristics of bank financial products, recognize that they are completely different from bank deposits, and the risk of bank financial products depends on the assets they invest in. At the same time, breaking the net will help investors make decisions based on the degree of risk they can bear in future investment and purchase more suitable financial products.
Li Qilin said that in the short term, it is necessary to increase the acquisition capacity and guide insurance funds, bank proprietary and securities proprietary to orderly undertake bonds sold by the market. This is not only to increase the holdings of government bonds, but more importantly, to expand the holdings of credit bonds, bank secondary capital bonds and perpetual bonds and reduce market volatility. In the long run, investors' education should be strengthened. It is strictly prohibited to explicitly imply the expected return rate in the sales process. Risk tips and customer manager training should be strengthened. The development trend of "scale only" should be eliminated. Financial management subsidiaries should be encouraged to compete differently to attract customers through differentiated and distinctive product design and solid investment performance, Use competitive marketization performance to feed back the scale expansion, accelerate the reform of financial sub marketization system and mechanism, etc.
(At the request of the interviewee, Li Dong is a pseudonym in the text)
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Cai Yuekun, reporter of Economic Observer
Senior reporter of Capital Market Department
Mainly focus on market reports in bond, trust, bank and other fields.
