The government bond yields break through the 2.3% integer mark.
As the Year of the Dragon begins, the 10-year and 30-year government bond yields, which are seen as proxies for long-term risk-free rates, have repeatedly hit new lows. On March 6, 2024, the newly listed active bonds, 240004.IB for the 10-year government bond and 230009.IB for the 30-year government bond, traded at 2.2925% and 2.4350%, respectively.
Speaking specifically about the 30-year government bond yield, it has dropped by 37 basis points since the beginning of the year. Jiang Wei, an economist, attributes the rapid decline in government bond yields to both long-term and short-term factors. Specifically, the continuous decrease in the return on capital and natural interest rates has led to a decline in social rates. While this long-term factor can only explain part of the trend, the short-term variables such as the central bank's interest rate cuts and market concerns about economic prospects have accelerated the decline in interest rates, significantly impacting the bond market.
Undoubtedly, government bond yields, as a barometer of the macroeconomy, have a significant impact on investors' wealth management strategies. The continuous decline in long-term government bond yields has undoubtedly brought positive effects to the fixed-income bond market, making already issued bonds more attractive to investors, thus pushing up bond prices. The rise in bond prices further boosts the net asset value of bond funds, thereby enhancing investment returns.
According to Choice data, larger-scale bond funds have performed well this year, with some pure bond funds achieving a maximum yield of over 4.5%. This phenomenon reflects investors' preference for bond funds in the current market environment and their emphasis on the hedging function of fixed-income assets.
With the bull run in the bond market continuing, funds with a preference for low risk are flocking to bond funds. Bond funds with good liquidity and low volatility are enjoying a small spring. Users on the JD Financial platform have found that the Guotai Hui Feng Pure Bond Fund (007214) has seized the bull market opportunity brought about by the decline in government bond yields. From January 1 to March 7, 2024, this pure bond fund achieved a return of 5.21%, with its unit net asset value rising from 1.0814 at the beginning of the year to 1.1399 on March 7, an increase of 10.52%. During this period, several bond funds on this platform also achieved gains of over 70%.
Against the background of the new asset management regulations breaking the "hard redemption" and increased volatility in the equity market, short-term assets are also attracting attention due to their characteristic of "slow and steady" returns. Short-term bond funds have become an important channel for investors to allocate idle funds. As of March 5, Wind data shows that there are a total of 337 short-term bond funds in the market, with a total size of 1.0067 trillion CNY, surpassing the trillion mark. Among them, 17 short-term bond funds have a scale of over 10 billion CNY each.
Opportunities come like the wind, while wealth management is like the helm. Many investors have seized the opportunity of the decline in government bond yields to find new investment directions in the bond market. They have obtained relatively high returns through investing in bond funds, purchasing government bonds, and other fixed-income products during the downward interest rate cycle, ensuring steady growth of wealth. Subsequently, with multiple factors such as loose liquidity, under-allocation of financial institutions, and LPR rate cuts exceeding expectations, the bull market trend in the bond market is expected to continue.
However, every coin has two sides. Although the rise in bond prices may bring short-term investment returns, there is also the risk of bond market differentiation and increased profit-taking pressure on some bond fund products. Especially with the continuous decline in long-term government bond yields, to some extent, it also reflects investors' expectations of future economic growth slowdown, which will affect the long-term performance of the bond market.
Therefore, some financial analysts suggest that when investing in bonds and bond funds, investors should comprehensively consider various factors such as macroeconomic trends, changes in market interest rates, inflation expectations, and policy guidance. At the same time, they should pay attention to credit risk, interest rate risk, and liquidity risk of bond funds to ensure portfolio diversification and achieve steady appreciation of assets.
