Frequent bond defaults
Credit risk pricing will be more market-oriented.
Many investors have analyzed that due to the macroeconomic downturn this year, the COVID-19 epidemic and the marginal tightening of monetary policy, the profitability and solvency of some enterprises have weakened, especially the default of some high-rated state-owned enterprises, which has a short-term impact on market sentiment. But in the long run, it will be beneficial to the marketization of credit risk pricing, and those institutions with outstanding credit research ability and pricing ability are expected to benefit.
Economic downturn superimposed on epidemic situation
The solvency of enterprises is weakened.
Wind data shows that as of June165438+1October 2 1, there have been 1 17 default bonds this year, with a default amount of1348.56 million yuan. Since 20 18, this year has been the third consecutive year that the default amount has exceeded120 billion yuan, and the normalization trend of credit bond default has become increasingly prominent.
Zou, the proposed fund manager of Zhao Li, Yin Hua, said that in the long-term downward trend of the economy, the ability of entities to resist risks is weak, the COVID-19 epidemic has a wide impact, and the profitability and solvency of some enterprises have further weakened; In addition, the current regulatory environment is still strict, the transition period of the new asset management regulations is gradually coming to an end, and the trend of long-term expansion of credit spreads has not yet ended.
Yin, director of the fixed income department of Hua Fu Fund, also said that because the default rate did not increase significantly this year compared with the same period of last year, this credit risk tide was triggered, mainly because the default subjects changed, and some high-rated enterprises, especially state-owned enterprises, defaulted one after another or the bond prices fell sharply. The field of default extends to the upstream resource industry and infrastructure industry, and its distribution is more diversified, which intensifies the market's concern about deepening risks.
Yin believes that the current wave of credit default broke out at the end of the year, which is also the result of the gradual withdrawal of easing policy in the context of the epidemic and the continuous marginal tightening of monetary policy since the end of April. Judging from the recent problems of enterprises, they all have the characteristics of heavy debt burden, weak profitability and great pressure on bond maturity, and their own credit defects are more obvious.
Some investors also pointed out that due to the invisible guarantee of local governments, some defaulting subjects have greatly expanded their credit, which has also laid a hidden danger for the current default of credit bonds.
Wen Yongpeng, deputy general manager of Hongde Fund, said that there have been frequent defaults in the bond market recently, and the reasons are more complicated. The main reason is that due to the invisible guarantee of local governments, the credit expansion of relevant entities in the early stage is relatively large, but the ability of sustainable operation of enterprises is relatively weak and the long-term debt level remains high. When the beliefs of state-owned enterprises and the government are broken, the market confidence drops, and the further financing of enterprises is blocked, the default event occurs.
A fund company in South China said that most of the AAA-level state-owned enterprises that defaulted in this round did not reduce their leverage in time in the operating dividend brought by the last round of supply-side structural reform, so they showed heavy historical burden, high debt pressure and high dependence on the bond market, so they were more vulnerable when the market financing environment was fragile.
However, according to Lin Jin, director of Pengyang Fund's credit strategy, the current stock of China's credit bond market is around 30 trillion, making it the third largest credit bond market in the world. In such a big market, it is normal for credit bonds to default. The main reason for breach of contract is the weak qualification of the enterprise itself; Secondly, the debt structure of some enterprises is too large, and the open market financing is not smooth, which leads to the funding gap; Finally, the current credit bond market has insufficient constraints on issuers and low default costs. After the breach of contract, enterprises may find that the pressure of production and operation has decreased.
Credit risk pricing or more marketization
Institutions with excellent credit research and pricing capabilities will benefit from it.
Many investment researchers believe that the default of credit bonds will form negative feedback to the market in the short term, but in the medium and long term, it will push the credit bond market to break the belief of state-owned enterprises and truly move towards market-oriented pricing. Those institutions with outstanding credit research and pricing capabilities will benefit for a long time.
Zou said that in the short term, credit risk events have caused some disturbance to the market. For example, the market worries caused by credit risk events have a wide range of influences, and it is more difficult to raise funds in the primary market of credit bonds. Some asset management products may be redeemed, aggravating liquidity friction. However, in the medium and long term, the future credit risk pricing is expected to be more market-oriented, and investors' attention to credit risk will inevitably increase significantly, and the advantages of specialized institutions such as public offerings in credit research and pricing capabilities will be more clearly reflected.
Wen Yongpeng also believes that after the recent bond default, investors need to pay more attention to credit risk and disillusionment, treat the credit bond market in a market-oriented way of thinking, and strengthen the investment research on the sustainable operation ability of enterprises.
"Default in the bond market is a normal phenomenon that China's economic development has entered a new normal. A market with liquidation and default is a mature, healthy market that can fully price risks." Ma Long, deputy director of the fixed income investment department of China Merchants Fund, said.
Relevant persons from the fixed income headquarters of Bosera Fund also analyzed that since the credit bond market is dominated by institutional investors, the investment behaviors are highly similar when credit events break out, and the centralized bond run will easily lead to extremely tight short-term liquidity of enterprises, thus making it difficult to pay.
Yin said that the emergence of default wave will cause the net value of some asset management products to drop sharply, which in turn will trigger a redemption wave, resulting in collective selling of credit bonds, which will form a certain degree of negative cycle in the short term. However, in the long run, as the scale of this round of default is still controllable, the market will gradually digest the impact and return to stability after investors' sentiment tends to ease.
In addition to market-oriented pricing, more investors also believe that the normalization of default will also lead to the differentiation of the credit bond market.
Zeng Xiaoli, deputy research director and fund manager of the fixed income department of Everbright Prudential, and Yan Yifan, assistant director of the fixed income department of Jinchuang Hexin Fund, believe that the credit bond market and yield will be more differentiated in the future. The price of corporate bonds with high financial leverage, short-term borrowing and long-term investment, aggressive investment and financing, and continuous tight cash flow may fall, and credit bond investment may further tilt to safer varieties.
Malone, the fixed income headquarters of Bosera Fund and China Merchants Fund, also believes that the occurrence of this credit risk event has weakened the blessing of "state-owned enterprise belief" to investors, and credit differentiation has become an inevitable trend in the long run. For example, before the default event is completely resolved, the refinancing of other main bonds and the valuation of existing bonds in the default area will face great impact; In provinces with strong economic and financial strength and good credit records, subjects with good credit qualifications and stable operations will be more favored by the market.
Lin Jin also analyzed that in the short term, the same region, similar industries and similar enterprises will be affected; But in the long run, investors may be more rational, pay more attention to the enterprise itself, and downplay factors such as shareholders and enterprise scale. In addition, the infrastructure of China's credit bond market still needs to be improved, and the protection mechanism for bondholders is also being explored. "The recent default events may promote the deepening of reforms in related fields and promote the high-quality development of the bond market."
Default in the bond market "normalizes" or becomes a trend
Layout heavy interest rate bonds and "fixed income+"
The bond market is in full swing recently. Affected by events such as Brilliance and Yongmei's default, the bond market fluctuated greatly. At the same time, institutional investors, including funds, have reduced their risk appetite and generally choose to wait and see.
Many interviewees said that if the bond market defaults or enters normalization in the future, the default of credit bonds is the prerequisite for the healthy development of the market. Looking at this problem more rationally, corporate credit bonds with good credit qualifications still have good investment value, while the default risk of tail entities will be normalized. This also directly affects the fund company's subsequent fixed income distribution. Some companies plan to change the main direction to interest rate bond products, "fixed income+",high-yield bond accounts and other products, and some companies will bluntly lay out more diversified bond products.
The clearing of the default risk of the tail subject will enter normalization.
Frequent thunderstorms in the bond market have attracted the attention of the market. "At present, the default of credit bonds mainly occurs at the level of' weak state-owned enterprises', but unexpected factors have caused some institutions to panic, weak debts have been sold off, and the phenomenon of funds running away in the bond market is prominent. The risk of short-term weak-qualified entities will continue to be exposed. Zombie state-owned enterprises with heavy debt burdens or radical private enterprises with high refinancing pressure may still default and accelerate the clearing of tail credit risks. " Relevant persons from the fixed income headquarters of Bosera Fund talk about the current market.
Listed people said that in the long run, with the gradual improvement of the credit bond market mechanism, the pricing system of bonds is more mature and perfect, and investors' ability to study and identify issuers has improved after the belief of state-owned enterprises has been broken, making it more difficult for weak-qualified enterprises to issue bonds and better management. The credit bonds of enterprises with good credit qualifications still have good investment value, forming a benign financing cycle, and the credit bond market will show a normalized process of clearing the default risk of the tail subject.
"The default of credit bonds is the premise of the healthy development of the market, and breaking the fair exchange is also the future trend." Malone, deputy director of the fixed income investment department of China Merchants Fund, also bluntly said.
Yin, director of the fixed income department of Hua Fu Fund, said that the short-term credit bond market is facing a "grey rhinoceros" impact. In the medium and long term, whether the default of credit bonds will worsen or improve depends on the institutional construction of the bond market and the promotion of breaking the rigid payment. The establishment and perfection of default recovery mechanism, enterprise bankruptcy liquidation and reorganization system and investor protection system are conducive to the healthy development of the bond market, which is also the cornerstone of the healthy development of the credit bond market. On the other hand, credit default will also be affected by the economic cycle. After the peak of credit expansion and the tightening of credit contraction cycle, the risk of credit default tends to accelerate.
Wen Yongpeng, deputy general manager of Hongde Fund, also believes that the default of credit bonds will enter a normalization process in the future, mainly because the financing environment in the market was relatively loose in the past, and some enterprises lacked control over their leverage level with the help of fund suppliers, and their investment and financing were somewhat blind. Under the background of the current economic transformation and supply-side reform, the related enterprises are characterized by weak sustainable operation ability and limited financing channels. In the future, the willingness of the government to endorse corporate financing will continue to decline, and the credit bond market will gradually become market-oriented, and the phenomenon of credit bond default will be normalized.
As for the short-term market reaction, many fund managers believe that it will not continue to spread in the short term. Zeng Xiaoli, deputy research director and fund manager of the fixed income department of Everbright Prudential, believes that it will not continue to spread in the short term, because the current credit expansion is superimposed on the improvement of real profit, which is a positive credit environment and the market will improve spontaneously. But the credit risk next year, especially after the middle of next year, is worthy of vigilance, because the growth rate of social financing will slow down next year, the credit environment is not as good as this year, and the probability of default will increase. Lin Jin, director of credit strategy of Pengyang Fund, also said that bond default led to the overall decline of bonds, and many middle and low-grade bonds fell sharply. If the yield of high-grade credit bonds rises sharply due to liquidity shock, it is an opportunity for allocation.
Frequent credit risks affect product layout.
Pay more attention to interest rate bonds and the direction of "fixed income+"
The frequent default of credit bonds directly affects the subsequent fixed income distribution of fund companies. Some companies plan to change the main promotion direction to interest rate bond products, "fixed income+"and high-yield bond accounts, and some companies will bluntly lay out more diversified bond products.
Ma Long, deputy director of the fixed income investment department of China Merchants Fund, said that the layout of fixed income products in the future is a broader and more comprehensive development trend, rather than simply responding to the limited market environment or responding to default events to promote a certain type of products. Different investors have different risk tolerance and expectations of asset returns. Various fixed-income products, including pure interest rate products and high-yield debt products, have enriched the whole category of fixed-income investment products, which is due to the healthy development of the market. Therefore, what we need to do from the product level is to create more diversified fixed-income products to meet the needs of various investors.
"With the normalization of credit bond defaults, the high-yield bond market is larger and more mature. If there is a suitable debt-end fund to favor the high-yield bond strategy, relying on the company's internal sound and mature credit research system, we will consider appropriate layout of such products in the future. " A related person from the fixed income headquarters of Bosera Fund said that in the current environment of tightening credit margin, the bond market pricing has not been fully reflected, and the current market environment is suitable for the investment layout of "fixed income+"products.
Zeng Xiaoli, deputy research director and fund manager of the fixed income department of Everbright Prudential, also said that credit risk and pricing will be more differentiated in the future, so products with different strategies will have market space in the future. The company will focus on interest rate bond products and fixed income multi-strategy (fixed income+) varieties.
Yan Yifan, assistant director of the fixed income department of Jinchuang Hexin Fund, also said that despite the recent frequent defaults, credit bonds will remain the main allocation target of bond funds for a long time, and fund investment needs to meet the appropriateness requirements of customers. There is no problem in the strategy of high-yield bond funds. The biggest problem is that the acceptance of ordinary investors is insufficient at present, and it is difficult to fully confirm whether the risk disclosure and evaluation are sufficient. In the short term, such funds are more suitable for institutional investors with analytical ability and risk acceptance.
In fact, judging from the newly issued bond products this year, we have paid attention to credit risk prevention. A few months ago, the regulatory authorities started from the declaration link, requiring the newly declared debt base to submit credit risk prevention materials to strengthen its anti-risk ability, and the new bond fund contract has a more detailed statement on the level of investment credit bonds. For example, for bond funds whose newly reported investment scope includes credit bonds, it is necessary to further refine the investment strategy of credit bonds in the contract, and clarify the investment proportion of credit bonds at all levels and the control degree of credit bond risk management. In the future, bond products will be more diversified and subdivided.
Public Offering of Fund has taken various measures to prevent credit investment risks.
Focus on building industry ecology
As an important institutional force in the bond market, many fund companies have also shared their previous experience in preventing credit risks. The person interviewed by the fund company suggested that the fund company should establish a perfect risk control mechanism before, during and after the event, so as to prevent risks in advance, reduce the exposure of portfolio credit risks and prevent credit risks to the maximum extent.
Risk prevention should be done well in advance.
Zou, the proposed fund manager in Zhao Li, Yin Hua, said that Yin Hua Fund adopts a combination of top-down and bottom-up methods in credit risk management. Among them, "top-down" refers to determining the overall risk exposure level of the portfolio based on long-term judgment of macro factors such as economic situation, monetary and credit environment and regulatory policies. This is in line with the asset allocation concept of Yin Hua Fund.
She even stressed that in the bond market, especially the credit bond market, because the overall liquidity is not strong, we can't expect ourselves to "run faster than others" and we should take precautions in advance. No one can always predict the market accurately. If the probability of a high-risk situation is already high, it should be avoided as soon as possible even if it feels early. "At the beginning of 20 16 and 20 18, we reduced the overall credit risk exposure of the portfolio twice. At that time, it was a bit premature and it was relatively easy to adjust positions. But coincidentally, in April of 20 16 and April of 20 18, the market entered a period of credit risk outbreak, benefiting from the previous position adjustment, and our investment portfolio was less affected. If the adjustment is made after the risk exposure, the difficulty may be greatly increased and the effect will be weakened. "
Yin, director of the fixed income department of Huafu Fund, said that the collective team mainly reduced the credit risk of holding bonds through two levels: system and method, and all products managed by the company never stepped on thunder. He said, first of all, the company has a complete risk control mechanism before, during and after the event. Secondly, in terms of methods, through the research and analysis of historical default subjects, it is found that private enterprises with high default probability generally have the common characteristics of "radical business expansion but no obvious improvement in profitability" and "large deposits and loans". The state-owned enterprises with high default probability generally have the characteristics of "virtual shareholder composition", "heavy debt burden" and "weak social importance". In daily securities selection, researchers need to make a comprehensive analysis of securities. Once the default warning signal appears, relevant entities are prohibited from entering the pool to minimize the credit risk of positions.
Reduce the weight of credit endorsement and gradually eliminate the bubble of credit evaluation.
In the recent default of credit bonds, the market is also disgusted with the proliferation of "AAA" rated enterprises. Some rating agencies in the market have a low degree of specialization, their profit model is biased towards enterprises, and their ratings are not objective and fair enough, which has been criticized by the market. People in the industry also offer suggestions on how to construct the benign development ecology of each subject in the bond market.
Wen Yongpeng, deputy general manager of Hongde Fund, believes that in the past, the credit rating was biased towards the profit model of enterprises, which caused a bubble in the domestic credit rating market to some extent. In the past, corporate financing had government credit endorsement, and rating agencies gave credit endorsement a higher weight in the rating process. In the future development process, institutions should be more cautious in rating work, reduce the weight of credit endorsement, gradually eliminate the credit rating market bubble, and promote the benign development of various market players.
Yan Yifan, assistant director of the fixed income department of Jinchuang Hexin Fund, observed that the inflated external rating made it impossible for the market to take external rating as the criterion, and institutions used the results of internal research as the basis for investment and risk control in investment. With the restriction of regulators on intermediaries, the liberalization of access of foreign rating agencies and the gradual growth of domestic third-party rating agencies, I think the whole credit evaluation market will gradually mature. "
Zeng Xiaoli, deputy research director of the fixed income department of Everbright Prudential, suggested that the information disclosure rules should be further improved, the on-site inspection of issuers should be intensified, and the issuer should be supervised to disclose information in a timely, full and complete manner during the duration of bonds, so as to raise the penalty standard for violations. In addition, it is necessary to strengthen the regulation and supervision of intermediaries, urge rating agencies and lead underwriters to perform relevant responsibilities, effectively reveal risks and protect the interests of investors. Bond investment institutions should improve their fine research capabilities and strengthen investment access approval and long-term tracking.
Lin Jin, director of credit strategy of Pengyang Fund, stressed that it is necessary to implement the Interim Measures for the Administration of Credit Rating Industry jointly issued by the People's Bank of China and other four ministries and commissions last year, especially to establish a reasonable two-way incentive and restraint mechanism. In addition, in the process of issuance and follow-up counseling, it is necessary to strengthen market self-discipline and heteronomy supervision, and standardize the issuance process from a market perspective.
This article is from China Fund.