CITIC SEC: When will the valuation of ultra-long-term credit bonds converge?

CITIC Securities released a research report stating that in the background of some volatility in the credit market in August, institutions may switch to more liquid varieties. Due to the weak market liquidity of ultra-long-term credit bonds, credit spreads have experienced excess adjustments. The recent downward trend in benchmark interest rates has not led to the convergence of long-term credit bonds. Looking ahead, the protection of ultra-long-term credit spreads still seems insufficient. If the central bank implements loose monetary policies quickly, the space for carry trades in credit bonds may open up again, and ultra-long-term credit spreads are expected to marginally decrease. If the central bank's loose monetary policy implementation lags behind, in the context of disturbances in the cross-quarter funding market and a rebound in long-term interest rates reaching low levels, the spreads will remain high and volatile. In the long term, for institutions with stable asset allocations, from a configuration perspective, ultra-long-term credit bonds still have valuation advantages compared to the overall credit market. They can provide a better defensive cushion and in the context of seeking relative returns, institutions can focus on the opportunity for allocation of long-term bonds of central enterprises and high-quality municipal investment companies. Key points from CITIC Securities: - Why is the long-end credit over-adjusted. - How are overseas ultra-long-term credit bonds priced. - What are the characteristics of ultra-long-term credit bonds. - Is the adjustment of ultra-long-term credit bonds in place. There are also risk factors mentioned in the report: unexpected central bank monetary policies, slower-than-expected macroeconomic recovery progress, tightening of domestic regulatory policies, and deterioration of financing environment due to individual credit events.