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After the interbank major interest rate bond yields rose significantly on August 8, the bulls continued to weaken on August 9, with the yields of 5-year and 7-year active treasury bonds rising by 4BP and 5.4BP respectively, and the yields of 10-year and 30-year active treasury bonds also rising by 3BP and 2.5BP respectively. Treasury bond futures closed down across the board. Among them, the 10-year treasury bond yield has wiped out all the declines since July 26.

A series of regulatory crackdowns are taking effect. On August 7 and 8, the National Association of Financial Market Institutional Investors issued a series of documents targeting small and medium-sized financial institutions for illegal treasury bond trading.Changshu Bank(601128.SH), Jiangnan Rural Commercial Bank, Kunshan Rural Commercial Bank,Sunong Bank(603323.SH) was subject to a self-discipline investigation for suspected manipulation of market prices and profiteering in secondary treasury bond transactions.

Since the beginning of this year, regulators have repeatedly called for preventing risks in the bond market, from "big banks lending, small banks buying bonds" to "big banks selling bonds, small banks buying bonds". Bond market insiders interviewed by the First Financial reporter believe that the general background of the above investigation is still to prevent interest rate risks in the bond market, and the recent trigger may be related to some small banks stepping on the "wool" during the bond selling process of big banks, which has a strong deterrent effect.

The market is closely following the above investigation results and impact. In the A-share market, the share prices of Changshu Bank and Suning Bank have also fluctuated downward in the past two days. On the 9th, the reporter called the Changshu Bank investor hotline as an investor. The staff said that the bank had received a self-discipline investigation notice from the Brokers Association and was currently in the self-examination stage. The specific results will be based on the investigation results. This situation has never happened before.

Strictly investigate illegal transactions of government bonds

This week's fierce battle between bulls and bears in the bond market ended with the bulls losing the upper hand. The yields of active 5-year and 7-year treasury bonds rose by 6.75BP and 11.5BP respectively, while the yields of active 10-year and 30-year treasury bonds rose by 6.2BP and 4.15BP respectively.

Judging from the interest rate trend and trading volume, the domestic interest rate bond market has experienced fierce and repeated pulls since August 5. It was not until the after-hours of the 7th and the morning of the 8th that the yields of major interbank interest rate bonds began to rise significantly on the 8th.

After announcing the launch of a self-regulatory investigation into the above four institutions on the 7th, the Brokers Association issued another statement during trading hours the next morning, saying that among the cases investigated recently,Some small and medium-sized financial institutions have violated regulations by lending bond accounts and transferring benefits in government bond transactions.The association has transferred some institutions that have seriously violated regulations to the central bank for administrative penalties, and is stepping up investigations into other such case clues.

This is the second time that the NAFMII has “hit” small and medium-sized financial institutions since April this year. On April 12, the NAFMII announced that according to the feedback from market institutions,Some small and medium-sized financial institutions are suspected of illegal holding and lending of bond accounts., a self-discipline investigation was initiated on six small and medium-sized financial institutions in accordance with the "Interbank Bond Market Self-Discipline Punishment Rules".

In fact, as long-term bond interest rates continue to decline, regulators have repeatedly warned of risks this year. Especially under the guidance of curbing idle capital, as the phenomenon of "big banks lending and small banks buying bonds" has intensified, the relevant investigations and window guidance of regulatory authorities have also increased.

Recently, there was news that the regulatory authorities of a province in East China asked rural commercial banks to pay attention to the risk of long-term bond holdings and not to increase their positions on a large scale during the period when large state-owned banks were selling bonds. As early as March, there was news in the market that in order to prevent rural commercial banks from holding too much long-term bonds and accumulating interest rate risks and affecting credit supply, the central bank had specially investigated the participation of rural commercial banks in the bond market.

Regarding the enthusiasm of small and medium-sized banks in buying bonds, many interviewees, including bank practitioners and researchers, told reporters that because rural commercial banks cannot expand their business across regions, it has become a "tradition" for them to be keen on buying bonds under profit pressure, and it has indeed contributed considerable profits to each bank. The "asset shortage" environment has further magnified this "tradition" - the difficulty in lending and the narrowing interest rate spread have increased the motivation for bond market allocation.

Not only small and medium-sized banks, but other banks have also actively or passively increased their allocation of government bonds since last year. A person from a large local bank told reporters that the bank's allocation ratio to bonds has increased by about 10 percentage points compared with usual.

Entering the high-level game stage, "big banks lending, small banks buying bonds" is gradually evolving into "big banks selling bonds, small banks buying bonds", which is also regarded as the direct fuse for the Negotiating Association to name four rural commercial banks this time.

Looking back, on August 5, the global capital market encountered "Black Monday", and the government bond interest rate staged a V-shaped reversal. The 10-year active government bond 24 interest-bearing government bond 11 (240011.IB) once hit a new low of 2.08%, and then rebounded sharply to 2.15% in the late trading with a sharp increase in trading volume, and finally closed at around 2.14%. At that time, there were rumors that some large banks sold government bonds under window guidance.

A bond market researcher said: "The first bird to stick its head out gets hammered. (Some of the rural commercial banks that took over the shares) may have been too precise in their attempts to 'take advantage of the situation'. It's hard to say exactly how they violated the rules."

What illegal operations may be involved?How does the survey affect

A person from the financial market department of a large state-owned bank told reporters that bond market trading chaos is relatively more common during periods of greater market volatility, but the two are often a process of mutual influence.

According to recent disclosures by relevant departments, the crackdown on chaos is not limited to small and medium-sized banks and other trading institutions. On July 22, the Financial Market Institutional Investors Association announced the launch of a self-discipline investigation into six currency brokerage companies and operators of related trading instant messaging tools because theyThere are suspected violations in bond matching transactions, such as leaving traces, involving some instant messaging tool operators。

Regarding the possible illegal trading practices of rural commercial banks, market analysts speculate that they may mainly include individual institutions conspiring to create low-interest rate transactions, buying bonds at high prices to send wrong signals to the market, and small and medium-sized institutional traders "arm in arm" with traders from large and medium-sized banks to conduct marginal transactions to transfer benefits, and even some practitioners "raising private equity" outside.

In response to such claims, the aforementioned city commercial bank official said that the model that is relatively familiar to the industry is still the previously "popular" "Class C accounts", or it may involve some private equity, but the details of the violations by the four rural commercial banks this time depend on the final investigation results. At present, most people in the industry are still just speculating.

A report from the Financial Fixed Income Group of Legal Consulting analyzed that the four rural commercial banks under investigation are known as the "Four Little Dragons of Interest-Bearing Rural Commercial Banks". As the most active players in the interest-bearing bond market, especially the medium and long-term interest-bearing bond market, the self-discipline investigation initiated by the Trading Association this time may be due to their recent transactions in medium and long-term treasury bonds.

"Generally speaking, the accounts lent by small and medium-sized financial institutions that can transfer benefits are mainly trust accounts and futures asset management accounts, because the thresholds for opening these two types of accounts are not high, and trading and interest settlement are relatively flexible. Generally speaking, it refers to bond traders or investment managers who use some abnormal means to transfer some abnormal profits to this account in the form of lending accounts." The report analyzed.

The report also mentioned that the "Class C Account" that was previously controversial in the market was of this model. In recent years, this form of settlement account has reappeared. The transfer of benefits is mainly carried out through the structured issuance of bonds and high-frequency trading of interest-bearing bonds.

In a previous report on six small and medium-sized financial institutions in April, the Financial Market Institutional Investors Association mentioned that market institutions had recently reported that someThere has been an increase in illegal and irregular activities such as collusion between employees of small and medium-sized financial institutions and external personnel, taking advantage of the expectation of a downward trend in treasury bond interest rates to hold shares on behalf of others and transfer benefits.。

The market is also paying close attention to the above investigation results and possible penalties. An interviewee told reporters that the specific results depend on what kind of illegal operations the institution has carried out and how the supervision determines the penalty, which may have a certain impact on market activity. However, a person from the financial market department of an East China city commercial bank said that the investigation is mainly aimed at deterring institutions with illegal trading behaviors, and daily trading will be limited.

According to Article 25 of the NAFMII's Self-Discipline Rules for Bond Trading in the Interbank Bond Market (hereinafter referred to as the "Rules"), market participants and transaction-related personnel are prohibited from engaging in profit-transferring activities, including but not limited to "Using the account actually controlled by itself as the counterparty, profit transfer is achieved through transaction spread”“Profit transfer through third-party transactions” etc. Article 26 clearly states that market manipulation includes but is not limited to “Collude with others to use their financial and securities advantages to conduct continuous false transactions to influence transaction prices or volumes”“Conducting back-to-back transactions with accounts actually controlled by oneself as counterparties to influence transaction prices or transaction volumes"wait.

According to the Rules, if market participants and transaction-related personnel violate the above provisions, the NAFMII will, after investigation and verification, give warnings, severe warnings or public reprimands, depending on the severity of the case, and may also order them to make corrections and apologize; in serious cases, they may be suspended from related business, suspended from membership rights, cancelled from membership or identified as inappropriate candidates, and it is recommended that the responsible personnel be permanently banned from the market. Those suspected of violating relevant laws and regulations will be transferred to relevant departments for further processing.

Next StepsWill the central bank take further measures?

Although the market has entered a phase of adjustment, against the backdrop of a slow recovery in the macro economy, continued expectations for interest rate cuts, the "asset shortage" not yet alleviated, and ample liquidity in the interbank market, the market is paying close attention to whether bond market interest rates will continue to fall and whether the central bank will take further measures.

CITIC SecuritiesFICC analyst Qiu Yuanhang told reporters that if the treasury bond interest rate no longer falls unilaterally, the central bank will have little need to initiate positive repurchase or sell bonds. If the interest rate continues to break downward after the adjustment, it is possible that the central bank will take more regulatory actions. "At present, the more satisfactory and more compromise way is to guide expectations by 'indirectly', guide interest rates to stabilize in the current range, and then wait for the government bond supply to speed up and alleviate the 'asset shortage'," he said.

The central bank's guidance of expectations is being strengthened, and the effect is considerable. "At the beginning of this week, some banks sold some of their bond holdings, which effectively blocked the trend of rapid decline in yields and also led to a significant change in investors' expectations of market trends."Everbright SecuritiesIn the view of chief fixed income analyst Zhang Xu, changes in the bond market in recent days have fully demonstrated that the power of the bulls is relatively limited. The above-mentioned banks can reverse the market trend in an instant when yields fall rapidly and bulls are strong, and the monetary authorities' guidance of yields is even easier.

The central bank previously announced that it would sell bonds, which resolved the market's concerns that "the central bank does not have enough 'ammunition'", but there are still doubts about "who will take over the central bank's bond sales". Regarding the sale of bonds by large banks, there are also views that the large banks "may not have enough 'ammunition'". Zhang Xu believes that compared with the use of specific tools, the attitude of regulators is more critical.

The aforementioned bond market researcher told the reporter: "For a single bond, the big banks may indeed run out of ammunition, but considering their holdings of all treasury bonds and interest-bearing bonds, the big banks' ammunition depots are large enough." Zhang Xu also believes that ultra-long-term special treasury bonds are being issued continuously, and big banks and the central bank can continuously obtain more "bullets", and the supply of ultra-long-term special treasury bonds and other government bonds is also an important force to promote the rebalancing of supply and demand.

The main considerations for the current central bank's guidance of expectations, based on the opinions of industry insiders, are still to balance stable growth and exchange rates on the one hand, and to prevent risks on the other. As for the latter, from the central bank's second quarter monetary policy implementation report released on August 9, it has added the requirement of "conducting stress tests on the risk exposure of financial institutions' bond assets to prevent interest rate risks", and has also increased the attention paid to the risks of asset management products. (For details, see the report "》）

Guojun Fixed Income Team analyzed that from the recent institutional behavior, rural commercial banks and public funds have made more net purchases, but this obviously goes against the original intention of reducing the debt holdings of small and medium-sized financial institutions and non-banks and avoiding maturity mismatch and interest rate risks. Large banks have a higher risk tolerance, but as primary dealers of treasury bonds, they mainly play the role of sellers rather than buyers. In this context, in addition to guiding regulatory expectations, the real solution to this dilemma also requires increasing the supply of safe assets.

Tan Yiming, chief fixed income analyst at Minsheng Securities, believes that the central bank's attention to long-term interest rate risks should not be underestimated, whether through "personally" borrowing securities to sell or guiding large banks to sell bonds. However, it is more of a signal and expectation management, buying time for space to wait for the time point to cooperate with the fiscal department. Therefore, the possibility of the central bank's operations triggering a large adjustment in the market or even negative feedback is not expected to be large. It is mainly a temporary disturbance rather than a reversal of the trend.

Tan Yiming predicts that before the monetary policy takes further interest rate cuts, the key resistance levels of the current 10-year and 30-year treasury bond yields are still at 2.10% and 2.30%, and the possibility of further breaking through the key points in the short term is not expected to be high.