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1、,119,118,117,116,115,113,112,111,110,109,Contact,Yield Indicators,Bond Research Weekly Bond Market Report,Securities Research Strategy Report 2012-8-13,Term 1 2 3 5 7 10 15,T-bonds 2.40 2.57 2.66 2.95 3.17 3.28 3.61,“Moderate supplement” to extension to bond markets safe period The most dangerous si
2、gnals for the bond market continue to abate, “moderate supplement” effect is lackluster: new credit data in July further dispelled the warnings of “hot supplements” driven substantially by investment in credit, and extended the safe period of the bond market. Our reasoning for “following the middle
3、path” was confirmed, that is, central government leaders have chosen to “leave some things undone”.,Interbank T-bond index,Economic data in July posted a rebound, and fundamentals continue to support the bond market. However,interest rate bonds have limited room to fall in the long-term, and investo
4、rs still need to keep an eye out for risk from institutional gaming. While in the medium and short-term, the cost of capital will be pulled down by cuts to yields, and the yield curves will continue to steepen. We recommend investors to gradually shorten their bond terms, and choose products with ar
5、ound 5Y terms. 114 New credit fell short of expectations, while the structure is not ideal: 1) the proportion of mid and long-term loans increased slightly, but the absolute amount fell by Rmb 60 bn compared to the previous two months; 2) short-term loans and bill financing still accounted for an ab
6、solute advantage of 58.4%, and,Jul/11,Oct/11,Jan/12,Apr/12,short-term loans only increased by Rmb 161.4 bn in July. However, bill financing rebounded relatively,Source: Haitong Research Institute Senior Fixed Income Analyst JIANG Jinxiang SAC No: 0850511010005 Tel: 021-23219445 Email: Xu Yingying,su
7、bstantially after shrinking in June, posting an increase of Rmb 152.6 bn in July. Current demand for credit still mainly stems from the need to supplement cash flow. Reiterate our view that central government leaders will once again choose the third option of “the middle path”: the combined effect o
8、f corporate demand and banks reluctance to lend seems to indicate that bank credit will have difficulty in further experiencing a controlled counter-cyclical reversal. So the government chooses to “leave some things undone”: that is, conform to (or avoid) the law of diminishing effect of investment,
9、 which shows that management has increased its tolerance of decline in economic growth, and does not rule out that the economy will continue to edge lower, and monetary policy needs more space for relaxation. Total national financing increased YoY, and regulation of off-balance-sheet has eased and t
10、he bond market continues to grow: Undiscounted bankers acceptance bills of exchange and trusts are still growing; meanwhile, the direct financing channels for bonds are expanding, which has benefited from the governments strong support of the growth of the bond market, and also benefitted from the r
11、elatively good bond market environment this year. We maintain that the “central bank has begun to relax the supervision of the off-balance-sheet financing channels, and the attitude towards counter-cyclical regulation is more positive, which strengthens the positive role of economic recovery, yet th
12、e effect remains to be seen”. Prices take a significant downturn as scheduled, price increases will be below 2% in 3Q: we reiterate our view that the CPI will downtrend, and in August and September CPI will continue to remain below 2%.,SAC,Certificate,No.:,With regard to the factors behind the trend
13、, the monetary factor of new credit, which has the greatest impact,S0850511100002 Tel: 021-23219885 Email： WU Liang Tel: 021-23219883 Email： HUANG Xuan Tel: 021-23219886 Email：,on the CPI trend, did not increase significantly, making us a bit more optimistic about the magnitude of the rebound of CPI
14、 in 4Q; and once again see that the third policy option is bound to affect the economy as well as the decline in the CPI in 2H and the magnitude of the 2H recovery. As the government increases its tolerance to the economic downturn, the magnitude of the rebound described in our mid-year policy analy
15、sis - Expectations for CPI to Rebound - will rebound. The “strengthening of stable growth” in economic data is still weak: In our judgement, industrial value-add will continue to hover at a low level in 3Q; FAIs “maintenance of stable” growth is lukewarm; total national retail of consumer goods sits
16、 steadily at a low level, and it is still uncertain whether or not a rebound will occur in the future; import and export data fell far short of expectations, and the challenge to reach the target of 10% for the whole year increased. Secondary market for interest rate bonds has improved slightly: Bec
17、ause the central bank was slow to cut the RRR, it uses reverse repos to ease actual strain on liquidity. Under these adverse effects, bond market yields have slid, while long-term yields have increased slightly. We believe that RRR cuts are imperative, especially in light of July economic data which
18、 were significantly less optimistic than that of 2Q, and the downtrend of cost of capital is inevitable. Please read the disclaimer at the end of this report,Investment strategy for interest rate bonds: Room for,extension of bond markets safe period is limited,Since the beginning of August, the main
19、 influencing factor on the bond market has continued to be the strained liquidity. Because the central bank has been slow to cut the RRR, it has been using reverse repos to ease the actual strain on liquidity. Therefore, the short-term bond market has been especially impacted by this adverse effect
20、and yields are increasing, while the increase for long-term bonds has not been large. Bonds with 7-year terms and above has seen increases within 10BP, while 3-year and below products have seen the greatest increases of 21BP. However, we believe that RRR cuts are imperative, , especially in light of
21、 July economic data which were significantly less optimistic than that of 2Q, and the downtrend of cost of capital is inevitable.,We have summarized the publicly released economic and financial data, and still,choose the “middle path”, which manifests in: credit has not been released in large,quanti
22、ties, while monetary policy is also slow to ease, and support from infrastructure and liquidity is lukewarm. Therefore, there are two main impacts on the bond market: 1),new credit data dispelled the warnings of “hot supplements” driven substantially by,investment in credit, and delayed the danger p
23、eriod of the bond market. The threat of,CPIs rebound on the bond market should be weakening. 2) government leaders have,increased their tolerance to a decline in economic growth. According to the current policy control measures, room for economic recovery in 3Q is limited, which allows for the safe
24、period of the bond market to be extended.,First, new credit fell short of expectations, while the structure is not ideal: 1) the proportion of mid and long-term loans increased slightly, but the absolute amount fell by Rmb 60 bn compared to the previous two months; 2) short-term loans and bill finan
25、cing still accounted for an absolute advantage of 58.4%, and short-term loans only increased by Rmb 161.4 bn in July. However, bill financing rebounded relatively substantially after shrinking in June, posting an increase of Rmb 152.6 bn in July. Current demand for credit is still mainly stems from
26、the need to supplement cash flow. Reiterate our view that central government leaders will once again choose the third,option of “the middle path”: the combined effect of corporate demand and banks,reluctance to lend seems to indicate that bank credit will have difficulty in further experiencing a co
27、ntrolled counter-cyclical reversal. So the government chooses to,“leave some things undone”: that is, conform to (or avoid) the law of diminishing effect,of investment, which shows that management has increased the tolerance of the decline in economic growth, and does not rule out that the economy w
28、ill continue to edge lower, and monetary policy needs more space for relaxation.,Second, total national financing increased YoY, and regulation of off-balance-sheet has eased and the bond market continues to grow: Undiscounted bankers acceptance bills of exchange and trusts are still growing; meanwh
29、ile, the direct financing channels,for bonds are expanding, which has benefited from the governments strong support of,the growth of the bond market, and also benefitted from the relatively good bond,market environment this year. We maintain that the “central bank has begun to relax,the supervision
30、of the off-balance-sheet financing channels, and the attitude towards counter-cyclical regulation is more positive, which strengthens the positive role of,economic recovery, yet the effect remains to be seen”.,Please read the disclaimer at the end of this report,Third, prices take a significant down
31、turn as scheduled, price increases will be below 2% in 3Q: we reiterate our view that the CPI will downtrend, and in August and September CPI will continue to remain below 2%. With regard to the factors behind the trend, the monetary factor of new credit, which has the greatest impact on the CPI tre
32、nd, did not increase significantly, making us a bit more optimistic about the magnitude of the rebound of CPI in 4Q; and once again saw that the third policy option (more dependent on interest rate cuts rather than credit) is bound to affect the economy as well as the decline in the CPI in 2H and th
33、e magnitude of the 2H recovery. As the government increases its tolerance to the economic downturn, the magnitude of the rebound described in our mid-year policy analysis Expectations for CPI to Rebound will rebound.,Fourth, the “strengthening of stable growth” in economic data is still weak: econom
34、ic,data for 2Q shows signs that the economic slowdown is stabilizing, and positive factors are still present: investment in the manufacturing sector stopped falling and rebounded slightly, and the single-month increase of infrastructure investment picked-up rapidly. However, industrial value-add and
35、 imports/exports rebounded in July, indicating that although the strength of stable growth is increasing, in light of the fact that the magnitude is not large, it is not appropriate to place too much strain on it promoting the economy. In our judgement, industrial value-add will continue to hover at
36、 a low level in,3Q; FAIs “maintenance of stable” growth is like lukewarm water; total national retail of,consumer goods sits steadily at a low level, and it is still uncertain whether or not a rebound will occur in the future; import and export data fell far short of expectations, and the challenge
37、to reach the target of 10% for the whole year increased.,Therefore, in terms of an investment strategy for interested rate bonds, we maintain our previous view: The warning for hot supplements has lifted, and the effect of moderate supplements has been lackluster, and the safe period of the bond mar
38、ket will be extended. However, even if it is estimated that interest rates will be cut again 2-3 times, the room for interest rate bonds to fall is still limited. Moreover, judging from 2Q economic data, if senior government leaders set 7.5% as the target growth rate for the year, then further inter
39、est rate cuts are pending deliberation.,For the time being the bond market is still in its safe periods, however, room for declines in the long-term are limited, and , and investors still need to keep an eye out for risk from institutional gaming. While in the medium and short-term the cost of capit
40、al will be pulled down by cuts to yields, and the yield curves will continue to steepen. We recommend investors to gradually shorten their bond terms, and choose products with around 5Y terms to carry out operations.,Please read the disclaimer at the end of this report,Fig2,(R ),(R ),(R ),Fig 1 Chan
41、ges in central bank notes yields last week (L,%),Changes in T-bond yields last week (L,%),3.0 2.9 2.8 2.7 2.6 2.5 2.4 2.3,BP（右轴）,2012-8-9,2012-7-31,16 14 12 10 8 6 4 2 0,4.0 3.5 3.0 2.5 2.0 1.5 1.0,1y,BP（右轴） 2y 3y,2012-8-9 5y 7y,2012-7-31 10y 15y,25 20 15 10 5,2.2,-2,0.5,1m,2m,3m,6m,9m,1y,2y,3y,0.0,
42、0,Source: Bloomberg，Haitong Research Institute Fig 3 Changes in policy-oriented finacial bond yields last week (L,%),Source: Bloomberg，Haitong Research Institute Figure 4 Narrow range of volatility for 10-year bond yields last week, (%) 6.0,5.0,BP（右轴）,2012-7-31,2012-8-9,14,5.5,4.0 3.0 2.0 1.0 0.0,12
43、 10 8 6 4 2 0,5.0 4.5 4.0 3.5 3.0 2.5,1y,2y,3y,5y,7y,10y,15y,2.0,2006,2007,2008,2009,2010,2011,2012,Source: Bloomberg，Haitong Research Institute,Source: Bloomberg, Haitong Research Institute,Figure 5 T-Bond Term Spread (%),1.2,3y-1y,5y-3y,7y-5y,10y-7y,1.0 0.8 0.6 0.4 0.2 0.0,Nov-08,May-09,Nov-09,May
44、-10,Nov-10,May-11,Nov-11,May-12,-0.2 Source: Bloomberg，Haitong Research Institute Please read the disclaimer at the end of this report,Disclaimers,This report is to be used solely by the clients of Haitong Securities Co Ltd (hereinafter referred to as the Company). The Company will not deem any othe
45、r person as its client notwithstanding his receipt of this report. Under no circumstances shall the information contained herein or the opinions expressed herein form an investment recommendation to anyone. Under no circumstances shall the Company be held responsible for any loss caused by the use o
46、f any contents herein by anyone.,The materials, opinions and estimates contained herein only reflect the judgment of the Company on the very day this report is released. The prices, values and investment returns of the securities or investment instruments referred to herein may fluctuate. At differe
47、nt periods, the Company may release reports which are inconsistent with the materials, opinions and estimates contained herein.,Investing in any asset class in the market bears risk; holding a cautious attitude is necessary. The materials, opinions, and estimates contained herein is only,used a refe
48、rence for the Companys designated clients, who shall not base their investment decisions solely on this report. We do not take into account specific,investment objective, financial conditions or needs of individual clients. For any opinion or suggestion expressed herein, clients should consider whet
49、her they are suitable for their particular situation(s). The Company and its affiliate companies may trade or act as broker for the securities of companies covered herein. We may also provide investment banking and other financial services for the covered companies.,This report is only available for
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