Central Bank's Latest Financial Data Attracts Attention

Our reporter, Ren Fei, notes that from the results, the scale of social financing was up by comparison, but government debt and bond financing took a big chunk of it, adding to the data showing a 4.2% decline in M1 money supply last month.

The central bank released its latest social financing data on Friday, which showed an increase overall, but with main forces growing at a slower pace, corresponding to the expansion of the scissors difference phenomenon within the industry. We need to be cautious in looking at it.

Firstly, as of the end of last month, the broad money supply (M2) was 301.85 trillion yuan, up by 7% compared with the same period last year. Narrow money supply (M1) was 64.68 trillion yuan, down by 4.2%. Currency in circulation (M0) was 11.71 trillion yuan, up by 11.7%, and net cash injection for the first five months of the year was 3618 billion yuan.

Secondly, as of the end of last month, social financing scale stood at 391.93 trillion yuan, up by 8.4% compared with the same period last year. However, government debt issuance and bond financing increased significantly, accounting for the main reason for the growth in social financing and credit.

Looking at it from a corresponding perspective, the data on social financing shows that the overall performance is basically consistent with market expectations, but there are still some structural features exceeding expectations. The M1 money supply decreased sharply, government debt issuance increased significantly, and residents' credit slowed down, all reflecting that social demand still needs to be repaired.

Analyzing the reasons behind this, it can be seen that M1 reflects real purchasing power, which is equivalent to liquid savings accounts used by individuals and enterprises for flexible spending. M2 may have increased, but it represents a type of time deposit capital similar to fixed deposits, with a growing gap between the two, indicating that the new money has not entered the circulation field.

In terms of debt issuance, frequent new issues were seen in recent times, especially government bonds. While it's undeniable that short-term assets will still attract more flexible funds and convert them into time deposit capital, medium- to long-term investments will still benefit the real economy by providing financial solutions for more financing institutions and helping the economy recover.

New government bond issues are significantly lower than expected values.

In the analysis of financial data, we can draw a simple conclusion that the social increase in idle funds is continuously increasing, while flexible funds are constantly moving towards idle funds, and the latter's destination is exactly those fields with fixed returns features. The bond market is particularly noticeable.

Last week, a total of 21 treasury bonds were issued on the primary market, with a total scale of 5974 billion yuan. Among them, government bonds accounted for five issues, totaling 4890 billion yuan; policy gold bond issues accounted for 16, totaling 1080 billion yuan; and local government bond issues accounted for 12, totaling 530 billion yuan.

As of last Friday, the interest rate on special treasury bonds issued was 2.53%, significantly lower than expected values.

This also reflects the decline in market risk tolerance. However, looking at the performance of various types of bond funds, medium- to long-term pure debt funds are still leading the way.

According to Wind data, as of last week, the top-performing products within the medium- to long-term pure debt fund had a yield exceeding 4%, such as Yong Feng Xin Rui, which recorded a six-month return of 4.344%.

For future configuration recommendations, institutions generally believe that short-term interest rates will stabilize or be normal, and the overall "buy high and sell low" strategy is still relatively high.

The research report from Zhejiang Securities analysis also points out that as of June's end, the bond market does not have a basis for trend changes, but attention should be paid to tax periods, the return of funds in the middle and late June, and potential effects on short-term interest rates.