Over a trillion yuan! The peak of local bond plan issuance has arrived, and the quota | remaining | plan
As of the end of June, many regions have disclosed plans to issue local bonds for the third quarter, with a total issuance amount of 1444 billion yuan.
Multiple experts predict that local bonds will experience a peak in issuance in the third quarter. As the issuance and use of new local bonds accelerate, it will drive effective investment and play a stabilizing role in the economy.
The third quarter will be the peak of issuance
According to statistics from Huajin Securities, as of June 30th, 19 provinces and cities with independent planning have disclosed their plans for the issuance of local bonds in the third quarter, with a total planned issuance of 1444 billion yuan. Among them, the proportion of newly issued general bonds, newly added special bonds, refinancing general bonds, and refinancing special bonds is planned to be issued at 133.8 billion yuan, 688.6 billion yuan, 320.2 billion yuan, and 301.4 billion yuan, respectively.
Several experts believe that local bond issuance is expected to peak in the third quarter.
Hu Xiaoli, an analyst at Xingye Research, believes that from the perspective of new bonds, there is a greater demand for early issuance and use of local bonds in the context of increased pressure on stable growth and continued pressure on government fund income. The new batch of local bond quotas may mostly be issued in the third quarter. It is expected that the newly added general bonds and special bonds in the third quarter will be 0.18 trillion yuan and 1.14 trillion yuan, respectively, an increase of 0.10 trillion yuan and 0.93 trillion yuan compared to the same period in 2022, providing support for the economic operation in the third quarter.
Liu Yu, Chief Analyst of Fixed Income at Guangfa Securities, stated that as of the end of June, the early approval quota for new local bonds has been basically completed. It is expected that 80% of the remaining quota for local bonds will be issued in the third quarter, and the remaining 20% will be issued in October November.
Liu Yu further introduced that the provinces that disclosed their issuance plans for the third quarter plan to issue 81% of the remaining special bonds and 89% of the remaining general bonds. This indicates that it is highly likely that the majority of the remaining newly issued local bond quotas will be completed in the third quarter. From a monthly perspective, based on the disclosed issuance rhythm of provinces in the third quarter, in terms of new special bonds, plans are made to issue 322.3 billion yuan, 309.3 billion yuan, and 151.7 billion yuan from July to September, respectively. July and August may show a "double peak" in the issuance of new special bonds.
Play the role of stabilizing economic efficiency
Since the beginning of this year, the issuance of local bonds has shown an overall high pace in the first quarter and a slight slowdown in the second quarter.
"This year, there were many early approval quotas and early issuance times for local bonds, so there was a significant effort in the first quarter. However, due to the late issuance of the second batch of newly added local bond quotas, the pace of local bond issuance in the second quarter slowed down. The overall issuance progress in the first half of the year was slower than the same period in 2020 and 2022, which is similar to 2021," said Wen Bin, Chief Economist of Minsheng Bank.
Experts believe that stabilizing the economy in the next stage still requires the effectiveness of local bonds. Wen Bin emphasized that since the second quarter, the marginal economic growth rate has slowed down, and prices are facing "quasi deflationary" pressure, reflecting that the foundation for economic recovery and development is not yet solid, the problem of insufficient domestic demand remains prominent, market expectations and confidence need to be improved, and achieving the annual economic growth target still requires local government bonds to stimulate effective investment.
Tan Yiming, Chief Analyst of Fixed Income at Minsheng Securities, said that overall, with the increased efforts of special bonds and the support of potential incremental policy tools, the growth rate of infrastructure investment in the second half of the year may rebound, providing certain support for stable growth.
According to Gao Ruidong, Chief Macro Economist of Everbright Securities, with the Ministry of Finance issuing the remaining local bond quota to various provinces and cities this year, the issuance of new special bonds is expected to accelerate marginally and be basically completed in the third quarter. Subsequent policies will focus on supporting special bonds to quickly form physical workload and improve the efficiency of fund utilization, in order to better play the role of stabilizing growth.