Agricultural Bank Adjusts Bond Transfer Limit for Debt Market Treasure

Following China Minsheng Bank, Agricultural Bank of China (ABC) has also taken action to adjust the transfer limit for its bond custody transfer business. ABC adjusts the transfer limit for bond transfers of Bond Market Treasure.

On October 11, ABC announced that it would adjust the transfer limit for Bond Market Treasure bond transfers.

The announcement shows that due to operational management needs, starting from 10:00 on October 14, 2024, the transfer limit for Bond Market Treasure bond transfers handled by individual investors through business outlets, personal mobile banking, and personal online banking channels will be adjusted to a daily cumulative limit of no more than 100 units (with a face value of 10,000 yuan). The transfer limit does not affect the transfer of Bond Market Treasure bonds into the accounts for individual investors.

ABC stated that if customers have objections to the above adjustments and decide not to continue using the Bond Market Treasure business-related services, they can sell all the held bonds during trading hours, terminate all Bond Market Treasure business, and then cancel the Bond Market Treasure business agreement.

Agricultural Bank Bond Market Treasure is a counter记账style bond business launched by ABC, which refers to the services provided by ABC to customers through designated domestic business outlets, online banking, mobile banking, and other channels, including opening bond accounts, distributing bonds, conducting bond transactions, and correspondingly handling bond custody and settlement, pledge registration, agency principal and interest payment, and providing inquiries. The main varieties currently handled include national bonds, local government bonds, China Development Bank bonds, and policy bank bonds.

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As a core product for individual investors to enter the counter bond market, after the launch of Agricultural Bank Bond Market Treasure, the customer coverage and activity have continued to increase. According to data disclosed by the Guangdong branch of ABC in May, the sales volume of Agricultural Bank Bond Market Treasure in the Guangdong area within the year has reached 8.5 billion yuan, and the cumulative trading volume has reached 15.3 billion yuan.

In the bond issuance announcement released on October 10, ABC stated that the Bond Market Treasure bonds are repaid by the issuer for the principal and interest of the maturing bonds, and ABC does not bear the investment, redemption, and risk management responsibilities for these bonds. Bond Market Treasure bonds do not guarantee principal and returns, and investors' principal may suffer losses due to market fluctuations. Bond Market Treasure bonds should not be considered as general savings deposit products or their substitutes.

Minsheng Bank also tightens the daily limit for related business transfers.

Fund Jun noticed that Minsheng Bank also announced on September 18 to tighten the daily limit for counter记账style bond transfers.

The announcement shows that according to business management needs, starting from September 18, 2024, the daily transfer limit for the bank's counter记账style bond transfer business will be adjusted to no more than 10,000 yuan (inclusive) of equivalent face value bonds.The bond custody transfer business refers to the act of investors transferring their held bonds from one custody institution to another for custody. This is primarily done to meet the diversified needs of investors, enhance the convenience of transactions, and exploit certain arbitrage opportunities.

Industry insiders believe that the two banks have successively adjusted their related businesses mainly due to their own business and operational management needs. It may also be related to the recent fluctuations in the bond market.

The bond market has shown significant fluctuations, facing redemption challenges in the short term.

Affected by a basket of monetary easing policies and the implementation of adjustments to existing mortgage loans, the bond market has experienced noticeable fluctuations recently. From September 24th to October 8th, the bond market continued to readjust, with bond yields of various maturities showing varying degrees of increase. However, with the recent adjustment of the stock market, the bond market has begun to stabilize and rebound.

Looking ahead, Guohai Securities believes that October is a period of dense policy issuance, and the bond market still faces the risk of disturbances. In the short term, the yield on 10-year government bonds may fluctuate between 2.1% and 2.2%.

At the same time, with the stock market becoming more active, the bond market is also facing redemption pressure. Not only have multiple bond funds increased the precision of their net value, but the phenomenon of "moving" wealth management has also occurred frequently. For example, the transfer volume of bank large-denomination certificates of deposit, which were previously hard to come by, has shown a significant increase, and several banks have successively suspended the rapid redemption business of cash-type wealth management products.

Huatai Securities believes that, for now, further redemption of wealth management and bond funds is inevitable, especially since the publication of wealth management net values has a lag. Residents may continue to redeem wealth management after seeing the net value of wealth management retract. This could be a key factor triggering over-adjustment, and the extent is unpredictable.

"From a trend perspective, the fixed-income market faces certain pressures, but there is no need for panic. Wealth management products still have advantages, such as relatively higher return levels compared to deposit interest rates and relatively lower risks compared to equity assets," said Zhou Maohua, a macro researcher in the financial market department of China Everbright Bank. The fluctuation risk of equity assets is relatively large, and ordinary investors should invest rationally and reasonably allocate asset portfolios.

Dong Ximiao, the chief researcher at China United, also said that a series of policy measures have been introduced recently, which will consolidate the foundation for the sustained and stable development of the capital market and provide ample momentum for the market's healthy and upward development. However, in a bull market, some investors lose money, and in a bear market, some investors make money. For investors, it is still necessary to make comprehensive asset allocation and rational investment based on their own investment experience, investment ability, and risk preference. They should not blindly chase rises and sell on dips, and it is not recommended to invest beyond their own risk-bearing capacity.