Long End CGBs Lag On Special Bond Issuance

CGB yields are unchanged to 3bp lower on the day, with most benchmarks rallying on solidified easing expectations given the ’24 Chinese annual GDP target being set at (the widely expected) “around 5%” and the rally in core global FI markets.

• 30s underperform after China disclosed that it will issue ultra-long special treasury bonds in the coming years, starting with CNY1tn of issuance in ’24.
• Premier Li stressed that China will “appropriately enhance the intensity of our proactive fiscal policy.”
• The potential for such issuance was previously flagged by BBG sources (including the exact ’24 issuance total).
• The MoF noted that the proceeds will be used to finance “major national strategies and building security capacity in key areas.
• BBG sources previously suggested that any such funds will be directed to food, energy, supply chain and urbanisation projects.
• The special debt issuance is not included in the official fiscal deficit target of 3%.
• It also points to a want to centralise the fiscal support.
• This is probably partly due to the debt burden/trouble faced by regional governments.