Xu Xiaoqing's Column: Are the Economic Expectations Implied by the 30-Year Treasury Yield Too Pessimistic? (AI Translation)
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- Since the beginning of 2024, 30-year government bonds have outperformed other domestic assets in China, with the yield spread between 30-year and 10-year bonds narrowing significantly to as low as 12 basis points (BP), driven by increased demand from insurance companies and smaller banks amid a long-term downturn in real estate.
- The speculative demand for 30-year bonds from brokerages and funds has risen due to continuous stock market declines, while the supply side has remained constrained despite record-low interest rates, with plans to issue special long-term government bonds starting this year.
- Despite concerns over deflation and comparisons with Japan's long-term deflationary environment, China's current monetary policies and private sector financing conditions do not fully support a sustained deflation scenario, suggesting that the extremely low yield on 30-year government bonds may be overly pessimistic about China's economic fundamentals.
文｜徐小庆
By Xu Xiaoqing
2024年年初以来，国内资产中表现最好的当数30年期国债。30年期和10年期国债收益率的利差摆脱了过去40至80个基点（BP）的区间，持续缩窄，最低时仅为12BP。房地产进入长期下行周期奠定了债券的牛市基础，但30年期国债如此疯狂，更多需要从供需层面理解。
Since the beginning of 2024, the best-performing domestic asset has been the 30-year government bond. The yield spread between the 30-year and 10-year government bonds has moved away from the previous range of 40 to 80 basis points (BP), continuing to narrow to as low as just 12BP. The entry of real estate into a long-term downward cycle has laid the foundation for a bull market in bonds, but the frenzy over 30-year government bonds needs to be understood more from a supply and demand perspective.
需求层面，首先保险对超长债的配置需求增强，导致30年期和10年期国债的利差中枢系统性下移。2023年全年险企的资金运用增量有近90%投向债券，而2021年至2022年该比例仅为65%—75%，其中超长期国债应是配置主力。此外，以农商行为代表的中小银行在实体融资需求疲弱的背景下，更倾向于通过债券交易来赚取价差收益，以弥补存贷利差减少的利润。从二级市场交易数据看，2024年2月20年期至30年期国债的净买入量中有近30%来自农商行。
On the demand side, first and foremost, the increased allocation needs for ultra-long-term bonds by insurance companies have led to a systematic downward shift in the interest rate differential between 30-year and 10-year government bonds. Throughout 2023, nearly 90% of the incremental capital utilization by insurance companies was invested in bonds, compared to only 65% to 75% during 2021 to 2022, with ultra-long-term government bonds being the main focus of allocation. Additionally, small and medium-sized banks, represented by rural commercial banks, tend to earn spread income through bond transactions against a backdrop of weak real economy financing demand, as a way to compensate for reduced profit margins from interest spreads. Secondary market trading data shows that nearly 30% of the net purchases of 20-year to 30-year government bonds in February 2024 came from rural commercial banks.
其次，股市持续下跌刺激券商、基金对30年期国债的投机需求。拉长久期和信用下沉，是固收业务增加投机收益的两大来源。疫情前，A股下跌常带来信用利差压缩，原本投资股票的部分资金转向高收益债，通过信用下沉获取超额收益。疫情后，信用债供给下降，尤其是具有高收益特征的AA级债券持续负增长，市场开始追逐利率风险高但受益于经济下行的超长期限国债及政策性银行债。近期A股持续反弹，30年期和10年期国债利差也有所回升。若A股持续上涨，那么这部分投机需求对超长债的偏好也会减弱。
Secondly, the continuous decline in the stock market has stimulated brokerage firms and funds' speculative demand for 30-year government bonds. Extending duration and credit downgrading are two major sources of speculative gains in fixed-income businesses. Before the pandemic, declines in A-shares often led to a compression of credit spreads, with some funds originally invested in stocks turning to high-yield bonds to obtain excess returns through credit downgrading. After the pandemic, the supply of credit bonds decreased, especially AA-rated bonds with high-yield characteristics continued to experience negative growth. The market began to chase ultra-long-term government bonds and policy bank bonds that have high interest rate risks but benefit from economic downturns. Recently, as A-shares have rebounded continuously, the spread between 30-year and 10-year government bond yields has also recovered somewhat. If A-shares continue to rise, then this speculative demand for ultra-long bonds will also weaken.
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