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A new round of savings bonds is coming. On August 11, a Beijing Business Daily reporter noticed that on August 10, the fifth and sixth phases of 2024 savings bonds (certificate type) were officially launched for sale, with the issuance deadline being August 19. The underwriting group includes 40 commercial banks. Specifically, the fifth phase has a term of 3 years, an annual coupon rate of 2.18%, and a maximum issuance amount of 12 billion yuan; the sixth phase has a term of 5 years, an annual coupon rate of 2.3%, and a maximum issuance amount of 12 billion yuan.

The interest rate of savings bonds was reduced by 20 basis points

It is worth mentioning that compared with the previous two issues of certificate savings bonds, the interest rates of the two issues issued this time have been lowered, and the issuance amount has also decreased. According to earlier sales information, the third 3-year and fourth 5-year certificate savings bonds issued in May 2024 had coupon rates of 2.38% and 2.5% respectively, and the maximum total issuance amount of the two bonds was 30 billion yuan.

In contrast, the annualized interest rates of the two latest issues of certificate savings bonds were both lowered by 20 basis points, and the planned maximum issuance amount dropped by 6 billion yuan. Based on the calculation that investors purchase 100,000 yuan of savings bonds, the returns of the newly issued 3-year and 5-year savings bonds are 6,540 yuan and 11,500 yuan respectively, which are 600 yuan and 1,000 yuan less than the previous products.

According to a reporter from Beijing Business Daily, savings treasury bonds (including certificate and electronic types) are non-circulating registered treasury bonds issued by the government (Ministry of Finance) to individual investors for the purpose of absorbing personal savings funds and meeting long-term savings investment needs. They usually have the advantages of high security, stable returns, flexible cash conversion, and low investment thresholds. Therefore, they are favored by a large number of investors, and it is often difficult to find a bond when they are issued.

Talking about the main reason for the reduction in savings bond interest rates, Feng Lin, director of the research and development department of Orient Securities, pointed out that the bond market is still in a bull market environment recently, and the yield of government bonds has further declined. At the same time, commercial banks have also recently started a new round of deposit interest rate cuts, among which the 3-year and 5-year fixed deposit rates have both been reduced by 20 basis points. In this context, the savings bond interest rate also needs to be adjusted "in line with the market".

Yang Haiping, a researcher at the Securities and Futures Research Institute of the Central University of Finance and Economics, said that the interest rate pricing of savings bonds follows the general rules of treasury bond pricing, which generally depends on the current monetary environment, interest rate levels and trends, and judgments on the supply and demand of savings bonds. The reduction in the amount of savings bonds this period may be an arrangement made based on the scale and structure of treasury bond issuance.

The People's Bank of China mentioned in the issuance notice that if the People's Bank of China adjusts the benchmark interest rate for RMB deposits of financial institutions from the issuance announcement date to the issuance end date of the two treasury bonds, the interest rates of the two treasury bonds issued after the interest rate adjustment date (inclusive) and the early redemption interest rates will be adjusted separately.

The popularity will continue

According to the China Monetary Policy Implementation Report for the Second Quarter of 2024 released by the People's Bank of China on August 9, in the first half of 2024, my country's total issuance of various bonds totaled 38.1 trillion yuan, an increase of 11.1% year-on-year, and an increase of 3.8 trillion yuan over the same period last year, mainly due to the increase in treasury bonds and interbank certificates of deposit. Among them, the scale of treasury bond issuance during the reporting period was 581.68 billion yuan, an increase of 133.21 billion yuan over the same period last year.

In recent months, the yield of treasury bonds has attracted wide attention from the market. According to Wind data, compared with the last savings treasury bond sale on July 10, the yield of the active 3-year treasury bond 230025 on August 9 was 1.6900%, and the yield of the active 5-year treasury bond 230022 was 1.8550%, down 7.2 basis points and 13.25 basis points respectively.

In addition, on July 22, the People's Bank of China announced the new loan market quotation rate (LPR), lowering the 1-year LPR and 5-year LPR by 10 basis points to 3.35% and 3.85% respectively. Under the interest rate marketization transmission mechanism, this policy rate cut has also further triggered banks to lower deposit rates. At present, the listed interest rates for 3-year and 5-year fixed deposits of the five major banks have dropped to 1.75% and 1.8%.

Not only that, after the large state-owned banks "took action", local small and medium-sized banks followed suit and lowered their deposit rates. Among them, the adjustment of 3-year and 5-year fixed deposit rates was significantly increased. The 5-year fixed deposit rates of some small and medium-sized banks fell by 80 basis points. Bank deposit rates have basically bid farewell to the "3" era.

According to the planning of the regulatory authorities, when the two treasury bonds issued this time are redeemed in advance, the interest will be calculated based on the actual number of days investors hold them and the corresponding interest rate level. That is: no interest will be paid if the holding period of the two treasury bonds is less than six months from the date of purchase, interest will be paid at an annual interest rate of 0.35% if the holding period is more than six months but less than one year, interest will be paid at an annual interest rate of 0.65% if the holding period is more than one year but less than two years, and interest will be paid at an annual interest rate of 1.67% if the holding period is more than two years but less than three years; interest will be paid at an annual interest rate of 2.12% if the holding period of the sixth treasury bond is more than three years but less than four years, and interest will be paid at an annual interest rate of 2.23% if the holding period is more than four years but less than five years.

In comparison, although the interest rate of the new savings bonds has been lowered, the adjusted interest rate level is still significantly higher than the bank fixed deposit rate of the same period. In Yang Haiping's view, although the interest rate of savings bonds has declined, it is still higher than the fixed deposit rate of some banks during the same period. In addition, the security and liquidity of savings bonds are very good. When investors' risk appetite is still weak, considering the security, profitability and liquidity characteristics, savings bonds must be the preferred choice of investors.

"The overall deposit interest rate is currently on a downward trend, and banks are also strictly managing large-denomination certificate of deposit quotas and time deposit interest rates. As long as the relative advantage of savings treasury bond interest rates remains unchanged, it is expected that the popularity of savings treasury bonds will continue," said Yang Haiping.

Feng Lin believes that for conservative investors, in addition to deposits and savings bonds, they can also invest in relatively low-risk products such as money market funds, wealth management, and short-term bond funds.

Beijing Business Daily reporter Liao Meng