If the bank's current regular interest rate is 4%, can I still sell my bonds with a yield of 5%? What if the bank's regular interest rate is 5%? Then no one wants bonds. Since bank deposits are risk-free, bonds have certain credit default risk. If the bank's regular interest rate is only 1%, then a 5% bond is still more attractive. Some people may buy it in a hurry and naturally sell it at a good price. The impact of interest rate cuts on bond funds is inevitable. An interest rate cut means that overall financing costs fall, the risk-free yield falls, the coupon rate of bond issuance falls, and the overall underlying bond yield falls.

Interest rate cuts not only have a direct impact on bonds, but also have an indirect impact. Falling interest rates will cause funds to flow to the stock market, reduce funds in the bond market, and bond prices will also fall. When the interest income from bonds is not as good as the interest income from stocks, the foundation chooses stocks. In 2012, the yield rate of bond funds was very good. At that time, fixed interest rates were high. The three-year time deposit interest rate was 4.25%, and the yield rate of bond funds was as high as 7.4%! After the interest rate cut in 2015, the three-year time deposit interest rate was 2.75 and the average bond-based yield was only 0.09% in 2016. The interest rate remained unchanged in 2017, and the average bond-based yield was only 1.83%. It is obvious that the bond-based yield and deposit Interest rates move in the same direction.

Therefore, interest rate cuts will lead to a decrease in bond yields. Lowering the deposit reserve ratio does not affect the bond yield. Therefore, the lower the bank interest rate, the higher the bond price. Then lower the deposit reserve ratio, thinking that targeted easing means financial institutions have more liquidity, more funds can be provided, and fewer gaps require borrowing. From the perspective of supply and demand, the prices of current bonds will also rise, and the returns of money funds that target money market instruments may fall further.

The bond market’s turn to a bull market will also be good news for bond funds. Last year, the performance of short- and medium-term bond funds and sinking funds was very good. The average annual yield of some short- and medium-term bonds reached 5.22%, and the average annual yield of long-term bond funds reached 5.44%. They are fully competitive in the financial market. Major fund companies also On an intensive bond issuance basis. According to the current situation, the liquidity issued by the central bank will greatly boost the real economy, and bond funds will still be on fire in 2019.