China's 2024 Special Treasury Bonds Begins Trading

China's 2024 Special Treasury Bonds See Unprecedented Surge in Secondary Market Trading

On May 22, 2024, the secondary market witnessed the debut of China's 2024 special treasury bonds, with a total value of 400 billion yuan and a 30-year term. The bond, labeled "24 special country 01," experienced an exceptional increase of over 3% compared to its face value, signaling an unusual surge in bond trading. The China Financial and Economic Publishing House reported that the bond's yield closely resembled that of the 30-year general treasury bond, traded through both spot and repurchase agreement methods. Trading for the bond underwent two temporary halts after reaching the daily limit increase, highlighting its unexpected market performance.

Key Takeaways

• The 30-year special treasury bond “24特国01” made its debut on May 22, 2024, with a significant premium of over 3% compared to its face value.
• The substantial increase is relatively rare for bonds, leading to temporary trading halts due to hitting the price limit.
• The bond was issued on May 17, 2024, by the Ministry of Finance, with a yield of 2.57% through a competitive bidding process.
• The special treasury bond “24特国01” is traded on the Shanghai Stock Exchange under ticker 019742 with two trading methods: spot and repurchase agreement.

Analysis

The unexpected surge in China's 2024 special treasury bond indicates strong investor confidence, possibly driven by the government's stability and commitment to economic growth. This development could potentially have a positive impact on China's financial market, attracting foreign investment and bolstering the yuan's international status. However, rapid price increases might cause short-term market volatility. In the long term, consistent yield rates may signal a shift in China's debt management strategy, with potential implications for global financial systems and debt markets. Countries and organizations with significant exposure to Chinese debt or investments, such as international banks and financial institutions, may need to reassess their risk assessments and investment strategies.

Did You Know?

• Special Treasury Bonds: These are bonds issued by the Chinese government to raise capital for specific purposes, in this case, a 30-year term bond labeled "24 special country 01" with a total value of 400 billion yuan. They are often used for funding large-scale projects, investments in infrastructure, or addressing national debt.
• Repurchase Agreement (Repo) Trading: A form of short-term borrowing for dealers in government securities. The dealer sells the government securities to investors, usually on an overnight basis, and buys them back the following day. The difference between the sale price and the repurchase price is the interest paid on the loan, known as the repo rate.
• Yield: The income return on an investment, such as the interest or dividends received. For the bond, the yield is typically expressed as an annual percentage based on its face value, maturity period, and coupon rate. In this case, the yield of the 30-year special treasury bond "24特国01" is 2.57%.