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Original title: Disorderly default of single bonds dampens market confidence, bonds still have to stick to “bottom line thinking” Source: Xinhua Finance
Xinhua Finance, Shanghai, November 15 (Reporter Yang Yiren) Recently, “the disorderly default of Yongcheng Coal Power” has become the most concerned topic and the market risk point. The continued fermentation of negative effects not only caused the sale of related bonds, but also caused the issuance of bonds of many entities in the same sector were forced to cancel.
Analysts believe that subsequent defaults by AAA-level state-owned enterprises will undermine market confidence. It remains to be seen whether the default “dominoes” will be reversed in the future. At present, under the premise of maintaining the bottom line of risk, the repayment of material defaulting obligations should be managed properly. It is the key.
The storm of default has engulfed the bond market
Credit incidents have occurred frequently since late October. “18 Sound Engineering MTN001”, “18 Founder MTN002”, “17 Shengtong MTN002” … Among them, the most concerned is no different from Yongcheng Coal and Electricity Holding Group Co., Ltd. (hereinafter referred to as “” Yongcheng Coal & Electricity “) of” 20 Yongmei SCP003 “did not pay interest.
As a former AAA state-owned enterprise, its recent breakup can be said to have been caught off guard. According to the reporter, Yongcheng Coal and Electricity issued a new $ 1 billion winning ticket on October 22, shortly before the breach of contract.
It can be seen that due to insufficient market expectations about the default of Yongcheng Coal and Power, the current credit obligations of the same industry (coal), homogeneous (weak state-owned enterprises) and even issuers of the same province (Henan) have suffered. miserably. The secondary market also sells everywhere and the primary market often cancels the issue. Many entities, including Shanxi Coal Import and Export Group Co., Ltd., Yankuang Group Co., Ltd., and Jinneng Group Co., Ltd. announced this week to cancel the bond issue. The impact is evident.
Whether it is the massive discount sale of related bonds, the alleged debt-based repayment or the further intensification of liquidity stratification, overlapping various true or false information that is spreading rapidly in the media group, if the sentiment of the institution is not available Effective easing and recovery, so the debt securities market may face a more substantial adjustment.
Huatai securitiesThe fixed income team has issued a risk warning. Some of the information often displayed by the “black swan” directly indicated the willingness of state-owned enterprises to repay debts. Investors should be wary of the subsequent risks of “explosive thunder”, including “debt-based debt-debt-destroying equity”. This constitutes a chain reaction of negative feedback.
Behind the “catty” especially to be clarified
As the bond market is becoming more and more normalized, why has this default triggered a huge market response?
First, despite the heavy debt and financial difficulties of Yongcheng Coal and Electricity, the secondary market price of its bonds in the previous period did not appear too obvious an anomaly. Although there was a small amount of transactions on the net price of 85 to 95 yuan, most of the transactions were still being evaluated. Close to value.
Second, on November 2, Yongcheng Coal and Electricity released the “Announcement on the Free Transfer of Assets of Yongcheng Coal and Electricity Holding Group Co., Ltd.”, stating that the company made a series of free asset transfers , which is conducive to unified coal resource management and integration The coal industry chain will improve resource efficiency and market competitiveness.
Third, the rating agency downgraded the subject rating of the company and its controlling shareholder from AAA to BB on the second day after Yongcheng Coal and Power defaulted, and included them in the downgrade watch list.
Fourth, at the end of September 2020, Yongcheng Coal & Power’s balance sheet shows that its monetary assets still exceed 40 billion yuan. Unexpectedly, cash cannot be used.
FromCICCThe research point of view pointed out that Yongcheng Coal Power’s breach of contract has a wide range of attacks. At the moment, credit risk is spreading to liquidity risk: the pledging rate of credit bonds in the repo market has been lowered and discounted, and even the credit bond guarantee has not been accepted. Institutions borrowed 100 yuan, but now they can only borrow 70, 80 The yuan is even lower and the remaining funding gap must find another way to fill. Looking back, if the negative feedback chain of “selling credit bonds – falling credit bond price – lowering the pledge rate, increasing money market financing difficulty – continuing to sell various assets” is worthy of supervision .
According to the reporter, Yongcheng Coal and Electricity will also face 12 billion yuan of bonds owed or sold in the next six months.
The “underlying thinking” still needs to be strengthened
Despite a rational analysis, compared to the current volume of the credit bond market, the balance of existing bonds of companies with recent valuation changes is only a drop in the ocean. Some industry insiders have also argued that the bond market is anything but turbulent and turbulent. The impact of this credit crash was actually reverie and panic at first, but the market is maturing and has a learning effect. At this moment, funds and institutions have begun to intervene courageously on those “unjustly killed” because of the panic.
However, most institutions, including CICC, suggest that, in the initial phase of risk fermentation, which is still very uncertain, taking into account the pooling and contagious characteristics of credit risks and the short-term pressure on credit spreads credit, reduces risk appetite. Strengthening self-protection should be the main course of action in the phased bond market. This means that some areas with higher risks and corporate bond market financing will face further hurdles.
“Restoring the cautious mood is a long process. Once the default event has pushed up the regional interest rate differential, it will take a long time for the regional interest rate differential to return. to its original point, ”said Liang Yantao, an analyst with the fixed income team at the Kaiyuan Securities Research Institute.
Everbright titlesIn an interview with reporters, Zhang Xu, the Institute’s chief fixed income analyst, stressed: “If the situation deteriorates further, innocent bond issuers in other regions may be affected in the future. Therefore, in the process management of the incident, we should establish a ‘General awareness of a national chess game firmly holds the bottom line of the absence of systemic risk.’
Zhang Xu added: “China is at a critical time to transform its development mode, optimize its economic structure and transform growth momentum. The impact of the new coronal pneumonia epidemic overlaps and the risk of insolvency. of debt by some companies will inevitably increase. For this, we must Treated in two ways. On the one hand, orderly defaults help market growth and rationalization of the price of credit. With the efforts of regulatory agencies, the mechanism of resolution of bond defaults is steadily improving and the market can better digest orderly bond defaults. On the other hand, disorderly defaults can undermine market confidence, increase financing costs and bond market difficulties, harm other issuers innocent and induce bond market builders to do more than ten is not hard to see and that only the orderly nature of defaults can be maintained to strengthen market discipline and enable the Chinese bond market to develop in a healthier way. ” (End)
Publisher: Mu Hao
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