The first pure treasury bond style index product adds style timing tools
There are currently 3 pure index bond funds in the Chinese market, namely China Southern CSI 50 Bond and China Asia Securities Debt China and Huabao Xingye CSI Short Financial 50. The first two products track broad-based indexes with wide coverage and vague style characteristics, while the latter tracks short-duration credit bond style indexes. There are no products tracking interest rate bonds or treasury bond indexes. The return risk characteristics of different bond types vary greatly, and the influencing factors are also different, resulting in a significant rotation effect between bond types. The Thai Bond ETF fills the gap in interest rate bond style index funds. Compared with the higher subscription and redemption fees of existing open-end index funds, the feature of being able to be traded in the secondary market also greatly reduces the cost of rotation operations and improves This provides active investors with the convenience of rotating securities styles.
The high trading activity of the underlying index component bonds reduces the difficulty of tracking
The component bonds of the underlying index of this product are government bonds with remaining maturities of 4-7 years, with large stocks and active trading The high degree of accuracy not only greatly reduces the difficulty for managers to track the index, but also provides sufficient securities sources for investors to apply for redemptions and arbitrage operations. From the perspective of bond types, treasury bonds have national credit endorsement and no credit risk. They are the main objects of allocation by commercial banks, insurance companies and other institutions, so the trading volume is significantly higher than other bond types. In addition, the 4-7-year treasury bonds cover the two key years of 5 years and 7 years. The stock and transaction scale are relatively high in each period, further improving the liquidity of the component bonds.
Tracking the net price performance of component bonds, the frequency and certainty of dividend distribution is high
The processing of coupon reinvestment is another major problem in index replication. The Cathay Shanghai Securities Treasury Bond ETF tracks the Shanghai Securities 5-year Treasury Bond Index. From the compilation rules, the index essentially reflects the fixed interest bonds listed on the Shanghai Stock Exchange with a remaining term of 4-7 years on the first day of the Treasury bond futures delivery month. Net price performance. The net price of a bond is equal to the full price of the bond minus accrued interest. In order to make the product's net value growth rate as close as possible to the net price index growth rate, the product needs to continuously eliminate the tracking error caused by accrued interest through dividends. In view of this characteristic, the Cathay Shanghai Securities Treasury Bond ETF can pay dividends up to 12 times a year. Judging from the statistical results, the current average coupon rate of government bonds with remaining maturities of 4 to 7 years is around 3.4%. After making up for annual management fees and transaction costs, it is still significantly higher than the dividend yield of stocks, so it must remain high. The dividend frequency is used to reduce the upward deviation relative to the index caused by accrued interest, and the certainty of dividends is stronger.
The low trading threshold can realize T+0 day reversal
From the perspective of trading characteristics, the entry threshold for the exchange market is low. You only need to open a securities account to participate, but the disadvantage is that Bond liquidity is poor; the interbank market has a higher transaction volume and better liquidity than the exchange market. However, this market is only open to institutional investors, and the minimum trading unit is at least 10 million yuan, which on the one hand blocks individual investors. and small investors. On the other hand, it is not conducive to dynamic asset adjustments for accounts with small capital sizes. The minimum trading unit of the Thai bond ETF is only about 1,000 yuan. The introduction of the market maker system and various arbitrage operations in the future will also significantly increase the trading activity of the share, making up for the shortcomings of the original bond trading market, especially for small amounts. Bond trading is facilitated by investors and individual investors.
Similar to stock ETFs, Cathay Shanghai Securities Treasury Bond ETF can achieve T+0 reversal trading. Specifically, shares purchased in the primary market on T day can only be redeemed in the primary market on T+1, but can be sold in the ETF secondary market on T day; shares redeemed in the primary market on T day can be redeemed in the primary market on T day. The corresponding subscription and redemption basket component bonds can be obtained on T day, and the component bonds can be sold in the secondary bond market on T day; the shares purchased in the ETF secondary market on T day can be redeemed in the primary market on T day; The funds obtained from the shares sold in the ETF secondary market on T day can be used on T day.