Central mom a slap, the financial market hemorrhage

These two days, under the stock market’s “years of quiet”, many investors do not know that the bond market is hemorrhaging.

People who buy stocks do not know, but people who buy wealth management, now must know –

Because the bleeding, out of the blood of the bank wealth management.

I have been saying that the bond, and especially the Treasury market, is the foundation of the contemporary credit-money system as well as the financial system of each country, and that fluctuations in the bond market are usually the basis for fluctuations in the stock market as well as other capital markets.

But if you look at Treasuries, while it’s true that yields have been lifting since November, in terms of overall, China’s Treasury yields haven’t changed much; they’ve gone up from about 2.65% to 2.85%, which is a 7% increase in interest rates.

However, if you look at the one-year certificate of deposit maturity yield and the inter-institutional pledged repo 7-day rate (DR007), which are closely related to the wealth management market, it is drifting up: the

The one-year interbank certificate of deposit yield to maturity, which was 2.03% two weeks ago, is now 2.55%, which represents a 25% increase.

DR007, which was 1.6% for 10 days, is now over 2%, which means a 30% increase. .

Note that in the last 8 years, only in October 2016, May 2020 and now, have short-term market rates seen such a rapid spike, and it is this sharp spike in short-term rates that has caused the bond market to hemorrhage.

It is the hemorrhaging of the bond market that has caused over 10,000 wealth management products to post negative returns in the recent week.

Many people may not be aware that the vast majority of us buy wealth management products from banks that have assets behind them, either bonds or interbank certificates of deposit, and then, with some products, some additional equity products with a very low percentage.

Further, considering that the bond market is still adjusting, the number of products with negative returns may increase in the future. In fact, the market has recently seen huge redemptions on the star products of several bank wealth management subsidiaries, and the negative feedback is continuing.

I’ll talk about this in two pieces.

The first piece is that after the implementation of the new regulations on asset management, bank wealth management today is no longer the bank wealth management of the past.

Since 2015, breaking the rigid exchange of wealth management products has been the goal of China’s financial regulators, but, until 2018, many banks were mixing deposits as well as wealth management products when marketing them, and many even had capital and interest-protected wealth management products, which was clearly inconsistent with the regulation as well as the policy.

On April 27, 2018, the People’s Bank of China, together with the CBRC, the SFC and the Foreign Exchange Bureau, issued a document called “Guidance on Regulating the Asset Management Business of Financial Institutions”, which is referred to as the “New Regulations on Asset Management” by the entire investment and wealth management industry.

However, when the policy was introduced, many banks still had some capital and interest-protected wealth management products in stock, so in order to achieve a smooth transition of the policy, the regulator gave a two-year transition period, ending at the end of 2020.

However, when the 100-year new crown epidemic was encountered in 2020, the regulator was extra-legal and allowed capital-protected and rigid financial products to continue for another 1 year, ending at the end of 2021.

However, from January 1, 2022, the “new regulations on asset management” officially implemented in the country

In other words, from January 1, 2022, banks will no longer be able to sell rigid financial products that claim to protect capital and bottom.

In other words, from 2022, regardless of investment or wealth management, the whole of China are no longer allowed to promise people what to protect the capital and bottom, but to accept the market risk, any investment in financial products may be profitable, but also may lose money.

The financial market in 2022, so ushered in two rounds of impact

The first round of shock, which occurred in March-April 2022, due to the plunge in the stock market, those financial products containing stock market products, saw a massive net break, with 3,600 bank financial products recording negative returns across the market in March, and 1,200 bank financial products with a cumulative net product value of 1 or less.

The current is the second round of shock, since the end of October, the possible reason for this round of shock is that, as the stock market fell to a very low position, many wealth management funds began to choose to redeem and enter the stock market, huge amounts of wealth management funds redemption brought huge amounts of selling, which led to the massive sale of bank certificates of deposit, the market short-term interest rates quickly upward, there is a “debt disaster This led to a massive sell-off of bank certificates of deposit, a rapid rise in short-term market interest rates and a “debt disaster.

The assets behind the wealth management products, which are basically made up of various bonds, turned negative as bond yields rose and prices plunged.

If you look at the interest rate level, both the one-year interbank certificates of deposit and the 3-month Shipboard, since the beginning of 2022 so far, can be described as all the way down, so much so that in October, the RMB 3-month market rate, even the U.S. dollar 3-month market rate is less than half, which means that the supply of funds in the Chinese market is very abundant, there is no shortage of money.

Unfortunately, the money, always in the financial system, “wheel spinning,” and now, the price of certificates of deposit fell, the yield on maturity rose, so that you the pursuit of “steady happiness” of conservative investment and financial people, also taste The “taste of decline”.

In this world, nothing will last forever, and there is nothing that can be earned or lost, everyone in China must learn to take market risks.


The second piece is to talk about the four “debt disasters” that have occurred in the Chinese bond market in the past 10 years.

At that time, many banks’ financial market departments and capital management departments were not yet separated, and their accounts were in chaos, and bond and money market transactions were extremely unregulated.

In order to rectify this chaos, the financial regulators suddenly began to strengthen regulation, requiring banks to completely separate their own accounts and wealth management accounts, the asset side cannot just engage in any term mismatch, which immediately let many engaged in the transfer of benefits, misappropriation and muddy water bank executives dumbfounded, the central mom at this time also deliberately stand idly by. By June, the overnight market interest rate, directly soared to 30%, the bank wealth management yield are fast to 10%……

In June, there was such a “money shortage”, we all think it’s about time, bond earnings are so high, hurry up and leverage dry ah!

What I didn’t expect was that in November, the central mom made such a play again; sitting and watching the market short-term interest rates soars, so there was another money shortage.

However, the two “money shortage”, are the institutional stampede, the people generally do not feel anything, but because of the money shortage, directly to the people’s wealth management yield to lift up, what the balance of treasure, CaiPuTong, degree Xiao man and other Internet financial products began to flourish.

With a large amount of money entering the bond market, bond yields gradually fell, which brought about a super bull market in the history of bonds.

With the decline in bond yields, the Chinese stock market also experienced a round of “leveraged bull” in the first half of 2014-2015, with countless funds entering the stock market through brokerage financing and leveraged funding, and then in mid-2015, the most famous stock market crash in Chinese history was brought about by deleveraging.



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