Credit risk leads to interest rate bond selling pressure! The window of insurance asset allocation is coming

category:Finance
 Credit risk leads to interest rate bond selling pressure! The window of insurance asset allocation is coming


Although there are many investment channels for insurance funds, bonds still exist in the insurance funds pursuing steady returns, and they account for the highest proportion of all kinds of assets invested by insurance funds. However, this makes insurance assets in the trend of low interest rates, there is no small allocation pressure.

In recent years, the global interest rate environment continues to be depressed. Although the domestic situation is not as severe as the zero interest rate and negative interest rate in foreign developed markets, insurance companies pay more and more attention to the problem of low interest rate. Insurance companies need to consider how to deal with this new normal.

In this process, insurance institutions also realize that although the downward trend of interest rates is unavoidable, it does not mean that interest rates do not fluctuate in the process of falling. Any time when the interest rate fluctuates upward is an opportunity for insurance companies to seize.

Now, it is such an allocation opportunity for interest rates to fluctuate upward. Since May this year, bond yields have continued to rise after reaching the bottom, opening a rare window for insurance fund allocation.

Take the yield of 10-year Treasury bonds as an example. At the beginning of January, the yield of 10-year Treasury bonds was 3.1485%. With the outbreak of the epidemic, the market risk preference decreased, and investors poured into the bond market. The bond yield dropped sharply. By the end of April, the yield of 10-year Treasury bonds had dropped to 2.538%. As market sentiment gradually stabilized, the 10-year Treasury bond yield bottomed out at the end of May and rose to 2.7053%.

Since then, the yield has continued to rise, and the yield of 10-year Treasury bonds rose further to 3.285% on November 26. Although this yield is down from the previous days high of 3.35%, it is still a stage high.

In August this year, a person in charge of the asset management center of a trillion level insurance institution told Chinese securities dealers that the medium and long-term view on the yield of 10-year Treasury bonds was that the central bank would be 3%. Judging from this judgment, the current yield of 3.26% also belongs to the active allocation point of the insurance assets Association.

From low configuration to standard configuration

At such a high interest rate stage, insurance companies are seizing the opportunity to allocate bonds.

A large insurance asset management fixed income investment manager also believes that the bond yield is expected to rise for a period of time in the future, which will bring better bond allocation opportunities for allocation funds.

The fixed income investment manager of a pension company said that in recent years, it has indeed entered the value range of medium and long-term fund allocation bonds, but there may be pressure after a month or two. He believes that the market for the medium-term trend of the current big divergence, the future direction of the bond market or depends on the determination of tightening monetary policy.

Due to the continuous inflow of premium funds at the liability side of insurance and the reinvestment demand of past mature funds, the roller coaster trend of bond market this year has brought great challenges to the allocation of insurance assets.

During the period of continuous low interest rates from January to April this year, considering the problem of debt cost coverage, some insurance investors said that they adopted the strategy of reducing the frequency and proportion of bond investment and shortening the allocation duration, preferring to hold cash and invest at an opportune time. In the first four months of this year, when the proportion of insurance asset allocation bonds dropped to a low of 34.25%, the proportion of bank deposits allocated also rose to 14.30% from 13.62% at the end of 2019.

Since the end of May, driven by multiple factors, bond yields have gradually risen, opening a certain window for the allocation of risky bonds. Since June this year, the strategy of bond allocation of insurance funds has gradually changed from low allocation to standard allocation.

Many of our accounts sold a lot of debt in March and April and allocated a lot of savings to wait for a good time to buy. Now that bond yields go up a lot, deposits are down. The bond investment manager of a large insurance asset management company once told the Chinese reporters of securities companies. When insurance investment institutions allocate bonds, they usually pay more attention to the period of high yield and allocate more bonds in the period of high yield. We will allocate ahead of time when yields are high, and even top up leverage. When the yield is low, allocate more deposits, or short-term, one-year products.

According to the latest data released by the China Banking and Insurance Regulatory Commission in September, with the rise of long-term interest rates, insurance asset allocation focuses on fixed income investment. In September this year, the yield of 10-year Treasury bonds increased by 13.05 basis points to 3.15%, and the allocation attraction of bond assets was further enhanced. Insurance funds seized the opportunity of interest rate rise and increased the proportion of fixed income assets. By the end of September, the proportion of bonds allocated by insurance assets reached 36.6%, up 0.9 percentage points month on month.

In addition to the yield performance of the bond itself, the investment allocation of insurance funds will also consider the cost performance of stocks and bonds, as well as the cost performance of bonds relative to other investment assets. For example, the yield of 3A grade non-standard debt plan is now about 4.7% - 4.8%, which is only about 40 BP premium compared with the yield of bonds of the same grade. In the past, the premium can reach 80-100 BP. Considering that the transfer of debt plan is difficult and the supply of high-quality projects is very few, under the condition of limited supply of high-quality non-standard assets, the enthusiasm of some insurance assets to allocate bonds will be greater than that of debt allocation plans.

Opportunities under the chain reaction of credit default

The allocation logic of insurance capital to bond market is inseparable from the judgment of fundamentals. In addition to the medium and long-term prediction, the recent default of AAA class state-owned enterprise bonds in the bond market has become another important factor affecting the allocation of the bond market.

In the short term, a senior executive of a state-owned insurance asset management company disclosed to the Chinese reporters of securities companies that due to the risk events of credit bonds and the market decline, some credit bonds with good qualifications and even interest rate bonds in the market have also been put under pressure, which has given the venture capital institutions the opportunity to buy at low prices.

In the medium and long term, the fixed income research team of CICC recently released a report that, from the macro environment, the impact of AAA level state-owned enterprise bond default is not limited to the bond market, but lies in the whole generalized liquidity system. According to the report, once monetary policy begins to decline continuously, it may be necessary to consider re easing at the narrow liquidity level, and interest rate bonds will gradually benefit. That is, yields are likely to start to fall next year.

The logic of CICCs report is that in the context of this years epidemic, monetary policy will be relaxed first and then tightened. Money market interest rates and bond rates were higher than at the beginning of the year. From the perspective of economic momentum in that year, it was not affected by too much tight currency. The main reason is that the issuance of credit and local government bonds this year is relatively large, and from the perspective of broad liquidity (social financing and M2 growth rate), it is still relatively high. This is similar to 2017. In that year, in order to deleverage and tighten narrow liquidity, money market interest rate and bond interest rate continued to rise, but loan interest rate and non-standard interest rate remained stable, the overall credit expansion was relatively smooth, and the economic momentum was not affected too much.

But looking back, we think things will start to look like 2018. CICC reported. In the same year of 2018, due to the continuous non-standard compression, credit began to tighten, shadow banking also shrank accordingly, and the growth rate of overall generalized liquidity (Social Finance and M2) gradually fell back, that is, the characteristics of tight credit appeared. Many default events began to appear in that year, resulting in a relatively low net increment of credit debt. The tight credit situation has impacted on the economy, and the stock market has weakened accordingly. Therefore, in 2018, the central bank began to relax at the level of the money market, and the interest rate and bond yield of the money market gradually decreased. However, loans and non-standard interest rates rose that year, reflecting the tightening of broad liquidity. Therefore, in fact, the pattern was tight in broad sense and loose in narrow sense. We expect 2021 to be similar. That is to say, the credit line may not be so loose next year, the fiscal stimulus will also be weakened, and the net increment of credit bonds will be weakened compared with this year after the rise of superimposed interest rates and the emergence of credit risks. Next year, the growth rate of social finance and M2 will gradually decline, which is equivalent to the process of tightening credit. According to the CICC report, this process may have a certain negative impact on the economy, which eventually makes monetary policy need to consider re relaxation. As a result, money market interest rates and interest rate bond yields are likely to start to fall next year. The recent credit debt incident has dragged down the rise in the yield of interest rate bonds. We believe that it is a good opportunity for low absorption. Over the past year, there will be certain trading opportunities for interest rate bonds next year. Source of this article: Zhong Qiming, editor in charge of securities companies in China_ NF5619

But looking back, we think things will start to look like 2018. CICC reported. In the same year of 2018, due to the continuous non-standard compression, credit began to tighten, shadow banking also shrank accordingly, and the growth rate of overall generalized liquidity (Social Finance and M2) gradually fell back, that is, the characteristics of tight credit appeared. Many default events began to appear in that year, resulting in a relatively low net increment of credit debt. The tight credit situation has impacted on the economy, and the stock market has weakened accordingly. Therefore, in 2018, the central bank began to relax at the level of the money market, and the interest rate and bond yield of the money market gradually decreased. However, loans and non-standard interest rates rose that year, reflecting the tightening of broad liquidity. Therefore, in fact, the pattern was tight in broad sense and loose in narrow sense.

We expect 2021 to be similar. That is to say, the credit line may not be so loose next year, the fiscal stimulus will also be weakened, and the net increment of credit bonds will be weakened compared with this year after the rise of superimposed interest rates and the emergence of credit risks. Next year, the growth rate of social finance and M2 will gradually decline, which is equivalent to the process of tightening credit. According to the CICC report, this process may have a certain negative impact on the economy, which eventually makes monetary policy need to consider re relaxation. As a result, money market interest rates and interest rate bond yields are likely to start to fall next year. The recent credit debt incident has dragged down the rise in the yield of interest rate bonds. We believe that it is a good opportunity for low absorption. Over the past year, there will be certain trading opportunities for interest rate bonds next year.