What Is a Bond?

Bonds are marketable securities issued by government, enterprises, banks and other debtors in order to raise funds, are issued in accordance with legal procedures, and promise to creditors to repay principal and interest on a specified date. ^[1]

[zhài quàn]

Bonds are marketable securities issued by government, enterprises, banks and other debtors in order to raise funds, are issued in accordance with legal procedures, and promise to creditors to repay principal and interest on a specified date. ^[1]

As a result, bonds have the following three meanings:

1. Bond

Although there are various types of bonds, they must contain some basic

Bonds are a type of debt and debt certificate

advantage

(1) Low capital cost

Interest on bonds can

Company disclosure

In the future, the proportion of bonds issued by non-state-owned enterprises and SMEs should be increased. For investors of bonds, it is necessary to gradually increase the proportion of bonds held by non-deposit currency institutional investors, to create conditions for social security funds, corporate annuities, etc. to enter the market, and to adopt various methods to enrich the investor structure. ^[4]

Facing the various risks that may be encountered during the bond investment process, investors should take them seriously, use various methods and means to understand the risks, identify the risks, find the causes of the risks, and then formulate the principles and strategies of risk management , Use a variety of techniques and methods to avoid risks, pass on risks, reduce risk losses, and strive to obtain maximum benefits.

(1) Carry out risk justification before investment. Before investing, we should fully understand and grasp various information through various channels, and analyze the risks that investment objects may bring from the macro and micro aspects.

(2) Develop various investment strategies that can avoid risks.

Stepped bond investment maturity. The so-called term maturation refers to investors diversifying their funds into bonds with different maturities. Investors often keep short-term, medium-term and long-term bonds in their hands. At any time, there is always a portion of bonds that are about to expire. After maturity, the funds are invested in the longest-term securities.

Decentralized bond investment types. The so-called decentralization means that investors invest their own funds in various bonds, such as government bonds, corporate bonds, and financial bonds. The returns and risks of various bonds are different.

The term of bond investment is short-term. The so-called short-term means that investors invest all their funds in short-term securities. This investment method is more suitable for Chinese corporate investors.

(3) Use a variety of effective investment methods and techniques.

Hedging with treasury bond futures trading. Hedging of treasury bond futures is very effective in avoiding interest rate risk in treasury bond investment. Treasury futures trading means that investors buy or sell Treasury bonds in the financial market at the same time, correspondingly make a forward transaction of the same type of bond, and then flexibly use short and long trading techniques, and Hedging transactions, using the profits and losses of futures trading to offset or partially offset the profits and losses of spot trading within the relevant period, so as to avoid or reduce the interest rate risk of government bond investment.

When people invest in bonds, what they care about most is

Bond fund

China's bond market has developed rapidly in recent years, and has achieved considerable development, making great contributions to China's economic construction and social development. However, compared with developed countries, it is still in its infancy, and there are huge gaps in many aspects, such as its size, variety, and development level of the bond market.

Analysis of China-US Bond Market

1. Comparative analysis of bond market issuance scale

In the US capital market, the bond market plays a very important role, and the development of bond varieties is relatively mature. Its size is also much larger than the stock market. The amount of Treasury bonds issued by the United States each year accounts for 100% of GDP. The market has a large variety of bonds that can be circulated in the country, including national bonds, municipal bonds, corporate bonds, and federal agency bonds.

The gap between China's bonds and the United States is large. The total annual issue is only about 15% of GDP, and the variety is relatively single. There are mainly a few of government bonds, central bank bonds, and policy bank bonds.

2. Comparative analysis of bond market investment varieties

The US bond market is dominated by short-term bonds issued by business enterprises and governments. Government short-term bonds account for 40% of government issuance. In addition, many local governments and local public institutions also issue local government bonds. These bonds are hailed as a security second only to "Phnom Penh bonds". Bond products issued by industrial and commercial enterprises occupy an important position and have a wide variety.

In China's bond market, government bonds account for a considerable proportion. Its Chinese treasury bills and central bank bills account for nearly 70% of the bond market, and most of them are medium-to-long-term bonds of 5-10 years. The proportion of corporate bonds is very small.

3. Comparative analysis of bond circulation market

Bond circulation in the United States is a trading market dominated by OTC transactions. At the same time, the universal application of electronic trading systems has also greatly promoted the activeness of the circulation market. The daily trading volume of the bond market is 13 times that of the New York Stock Exchange. Government bonds and bonds issued by government support agencies are very active.

Bond circulation in China is dominated by the Shanghai and Shenzhen stock exchange markets, inter-bank bond exchange markets, and over-the-counter trading markets of securities institutions. The trading volume is relatively small, and the overall turnover rate is only 1/10 of the US bond market.

4. Comparative analysis of investor structure

Domestic domestic bond investors are mainly banks, funds, individuals, insurance companies, foreign and international institutional investors, etc. The proportion of various types of investors holding bonds is relatively balanced. The investment structure of China's bond market is not entirely reasonable. There are mainly state-owned commercial banks, joint-stock commercial banks, urban commercial banks, rural credit cooperatives, insurance companies, securities companies, fund management agencies, etc. Although the number of market participants is large, the proportion of bond holdings is extremely uneven, and the participation of foreign institutions is low.

Enlightenment of bond market development

1. Actively expand the size of the bond market and promote the diversification of bond market varieties

From the comparative analysis of the bond markets of China and the United States, it can be seen that the scale of China's bond market has a huge development space compared with the size of the US bond market. US securitization products exceed 80% in the financial market, and China is less than 10%; the balance of bonds, the United States is equivalent to twice the GDP, and China is only close to 30%. Therefore, actively expanding the size of China's bond market is to meet the financial market Development and the need to promote economic development. At the same time, it is necessary to actively promote the diversification of the variety of bond markets and meet the financing needs of different issuers. Such as actively developing the local government bond market; expanding and guiding the issuance of corporate bonds; adding short-term bonds and short-term repurchase products; establishing benchmark treasury bonds and derivative products.

2. Improve market maker system and promote market liquidity

From foreign experience, the market maker system can actively trade securities and ensure high liquidity in the market. This has been widely adopted by many mature securities markets and has a good market foundation in developed securities markets. Although China's inter-bank market has begun to implement the bilateral quotation system, all approved commercial market makers are commercial banks. The asset structure of commercial banks is similar, and market trends are expected to converge, resulting in bilateral quotations deviating far from market prices and spreading. Large, it is difficult to stabilize the market price, not to mention their willingness to participate in secondary market transactions, leading to a decline in the market share of these bilateral quotations, far from playing to promote enhanced market liquidity and meet market demand effect.

Therefore, when vigorously promoting the bilateral bidder system, it is necessary to adopt the qualification of bilateral bidders under the approval system, expand the scope of bilateral bidders, and allow powerful insurance companies such as China Life Insurance Company and securities companies to become bilateral bidders in order to resolve bilateral bidders. The issue of convergence of investment preferences of bidders. While promoting the market maker system, a brokerage system is implemented in the bond market to further promote the development of the bond market. Brokers are well-developed and well-informed, which can effectively concentrate market demand information, communicate with buyers and sellers of bonds, and improve transaction efficiency.

Liquidity encourages small and medium investors to participate in the bond market, which is conducive to improving the bond market investor structure and the pattern of investment institutional investor games.

3. Promote rationalization of investor structure

China's bondholders are mainly concentrated in commercial banks, especially in the interbank bond market. Other institutions and personal bond holdings are very small. China should further expand the investment group of the bond market, increase the proportion of bonds purchased and held by enterprises and institutions other than financial institutions, and foreign institutional investors; increase the number of members participating in over-the-counter transactions, and increase the number of securities dealers in addition to commercial banks; Increasing the number of tradable products in the over-the-counter market, encouraging over-the-counter trading, and improving market liquidity; it can also widely attract other broad investment groups.

In addition, funds such as social security funds, foreign-funded institutions, Chinese-foreign cooperative funds, foreign-shared securities companies, foreign-shared insurance companies, foreign-funded banks, foreign-funded enterprises, foreign investors, and savings deposit diversion can be gradually introduced into the bond market. The entry of these funds into the bond market will help expand the demand for the bond market and also balance the investor's bond holdings. By promoting the diversification of investors in a wide range of aspects and relying on the huge liquidity of the national debt market, institutional investors can fully play the function of discovering the price of national debt, and finally a stable and reliable national debt yield curve can be established.

4. Accelerate the pace of unified bond market construction

With the continuous expansion of the scale of national debt issuance, the market segmentation problem has become impatient. Stepwise and systematically allow tradable government bonds to be circulated and transferred both in the interbank market and listed on the exchange market; at the same time, allow some financial institutions with better credit and stronger strength to arbitrage between the two markets Activities to promote market liquidity, discover bond market prices, and prepare for the overall unification of all bond markets.

The development goal of China's bond market is to become a unified, open, open market for all financial institutions and corporate legal persons and individual investors, as well as a Chinese bond market with diversified varieties, adequate liquidity and sound functions.