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    First Quarter Local Debt Inventory: Broaden Channels

    2019-04-15 07:52:31

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    The early issuance of local debts in 2019 and the multi-party support of the government prompted the organization to increase the enthusiasm for the subscription of local bonds. Recently, the Ministry of Finance also allowed commercial banks to issue local government bonds through the over-the-counter market, which also broadened the financing channels for local bonds to a certain extent. Market performance also exceeded expectations. The efficient issuance of local debt will help alleviate the financial pressure of local governments, and will also benefit the boost of infrastructure investment.

    The issuance of local government bonds has been accelerated, and active fiscal policies have helped to improve efficiency.Since the end of last year, multiple policies have taken care of the issuance and subscription of local bonds, and the policies have been gradually guided. Diversified subscriptions have helped the local debt market to finance. It stipulates that local government bonds can be issued in the region through the commercial banking counter market. It is also the highlight of the local bond issuance subscription, which helps to alleviate the pressure of the primary market in the past.

    The use of funds is mainly based on infrastructure and people's livelihood and environmental protection, and interest rates in different regions are different.In the first quarter of 2019, 101 general bonds were issued, with an issue amount of 698.7 billion yuan and 244 special bonds with an issue amount of 753.633 billion yuan. According to the statistics of the use of raised funds, the flow of local debt funds in 2019 tends to be in the areas of infrastructure construction and people's livelihood and environmental protection. Geographically, the distribution scale and price of different provinces are relatively weakly related to regional economic strength.

    Commercial banks are still the main holders of local bonds, and general funds have increased significantly.As of March 2019, the amount of local debt custody increased by 360.9 billion yuan. In the investor structure, commercial banks hold the highest amount, but the growth rate has slowed down. Generalized funds increased their local debts significantly in March, compared with a net increase of 70 billion yuan in February to reach 219.5 billion yuan. The counter market began to increase the local debt of 1.401 billion yuan in March, and insurance institutions also increased their holdings by 7.3 billion yuan. Local debt. Policy banks, securities companies and exchange markets have different levels of reduction.

    Inner Mongolia issued special debts 50bp above the lower limit, creating a new high in local debt.Judging from the results of the issuance, the bidding is still active, and the local debt has not been significantly affected by the demand. The reason is that the price is relatively high due to the economic factors of the regional year-on-year, and also due to the recent upward evaluation of the secondary market. To a certain extent, it has caused the impact of local bond issuance.

    Local debts have more to help the city's investment debt than squeeze.The market is concerned about whether the heavy-duty issuance of local bonds will have a squeezing effect on urban investment financing, which will lead to the weakening of the city investment platform in the local financing function. We believe that there is no significant substitution effect between the two in the actual process. At this stage, part of the local general debt and special debt commitments are included in the budget construction funds but more supplementary construction arrears in the past local platform construction projects, due to 2019 The deficit rate and the size of the special debt are lower than expected. The local debt rush and policy promotion are more to share the local government's debt repayment pressure and liquidity risk. In addition, under the influence of various policies, most financing platforms have not added public welfare projects since 2018. Therefore, the substitution and squeezing effects of local debts and urban investment are not obvious at the present stage, and both will be alleviated. Local government debt pressure is the primary goal.

    Bond market strategyAfter the shock adjustment, the interest rate has gradually absorbed the warming status of financial and entity data at the beginning of the year. At the same time, the market has psychological expectations for fundamental stabilization and credit recovery, unless there is a loosening of funds channels or even an increase in policy-based intervention. With limited space, we can pay close attention to the band opportunities created by the recent monetary policy to protect the market liquidity gap.

    Risk factors:Money is not well transmitted to credit, financial data and the real economy are lower than expected.

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    Editor in charge: Robot RF13015

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