To understand the factors that affect the price of government bonds, the factors that affect the price of government bond futures, and the factors that affect the trend of government bond futures, we must first understand the pricing principle of government bond futures. The pricing principle of government bond futures is the same as that of general futures, and it also uses risk-free Pricing principle, but due to the particularity of the subject matter and delivery system, the pricing of Treasury bond futures is relatively complicated. According to the risk-free pricing principle, it can be seen that the main factor affecting the price trend of Treasury bond futures is interest rate.

One of the factors affecting the price of government bond futures: interest rate policy

Changes in my country's market interest rates will lead to changes in the price of government bond futures in the opposite direction. Therefore, the benchmark interest rate, which is the benchmark for market interest rates, is the central bank's benchmark interest rate. Interest rate policy is a very critical consideration because when the People's Bank of China adjusts the benchmark interest rate, the interest rates on various financial assets will be adjusted accordingly. As shown in Figure 1, judging from the general trend, the yield to maturity (5-year period) of fixed-rate government bonds between banks and exchanges is basically the same as the one-year benchmark interest rate.

Figure 1 Fixed-rate government bond yield to maturity and one-year time deposit interest rate

The second factor affecting the price of government bond futures: the supply and demand side of government bonds

In addition to interest rates Policies affect Treasury bond futures prices, and the supply and demand for Treasury bonds themselves will also affect futures prices. Treasury bonds are issued by the Ministry of Finance to make up for the fiscal deficit. At the end of the year, the Ministry of Finance will issue notices on the key maturity treasury bond issuance plan for the second year and the first quarter treasury bond issuance plan. Therefore, it is possible that the issuance volume of treasury bonds of a certain maturity is greater than the institutional allocation. need. This will make the interest rate on the day of newly issued government bonds too high, which may have an impact on the secondary market. In addition, the allocation needs of institutions will be affected by the funding situation. The tighter the funding situation, the greater the holding cost of bonds, and conversely, the smaller the holding cost of bonds. Therefore, tight funding may affect the allocation needs of institutions, which may in turn have a short-term impact on the bond market. The tightness of funding will be reflected in money market interest rates such as Shibor, central bank bill rates, and repurchase rates. The central bank affects the funding profile of the interbank market by issuing central bank bills in the open market, conducting repurchase operations, and adjusting the deposit requirement ratio. Therefore, these are important factors affecting short-term fluctuations in Treasury bond prices. In addition, the compression of credit loan scale will also increase the bond allocation needs of commercial banks, which will also affect the supply and demand of government bonds, thus affecting the price of government bond futures.

The third factor affecting the price of Treasury bond futures: Treasury bond futures delivery period

The trading period of Treasury bond futures affects the price of Treasury bond futures. According to the contract settings of stock index futures, Treasury bond futures total 4 years per year. A quarterly monthly contract with a term of three terms can be traded at the same time. According to the analysis of the participating groups of treasury bond futures, the main investment entities will be banks. Banks are the main holders of domestic treasury bonds. Participants in treasury bond futures Core group, therefore, the main investment direction of banks participating in treasury bond futures should be value-preserving operations. Therefore, when the contracts are rotated, the price of the January contract may interact with the near-month delivery contract and spot. However, the three deviate from the theory. value, forming short-term arbitrage opportunities.