CICC: Interest Rate Increase Has Little Impact On Bond Market.

According to the report, the yield of the two tier market of the central bank is expected to decrease gradually following the decline in repo rate in the case of liquidity improvement, and the one or two level spreads are expected to shrink.

However, there is still some uncertainty about whether the 1 - year central bank and the 3 - year central bank can completely eliminate the one or two level spread. The demand recovery is relatively determined by 3 months' central bank votes.

The 1 day repo rate is expected to fall to 2% near the beginning of next year. In the 3 months this year, the yield of the two class market of the central bank is relatively close to that of the 1 day repo rate.

For the first quarter of next year's bond market, CICC remains optimistic, for three reasons:

The first is due to the massive liquidity released by fiscal deposits at the end of 12 and the liquidity tendency of the central bank before the Spring Festival to improve liquidity in the interbank market.

New issuance bonds are few, and banks have stronger demand for bond allocation in a relatively loose liquidity environment, which is expected to support the market.

Secondly, the central bank again raised interest rates in December to reduce the probability of further interest rate increases in the future, so that policy faces a stable period.

The rise of the interest rate boots has eliminated the uncertainty of the policy in the coming period, which has reduced the concerns of the trading investors.

Third, after the interest rate rises, the issuance rate of the central bank will rise smoothly. At the same time, the yield of the two tier market will gradually decrease with the improvement of liquidity. The narrowing of the one or two level will help to raise the demand for the central bank's subscription. In the 3 months, the circulation of central bank tickets and repo is expected to increase significantly. However, there is still some uncertainty in the demand for the 1 and 3 year central bank tickets.

After raising interest rates again, the interest rates on the central bank will rise in varying degrees.

The issuance rate of central bank votes in 3 months is probably the largest, and is expected to reach 2.15-2.25%.

The issuance rate of the 1 - year central bank will reach 2.6-2.7%, and the issuance rate of the 3 - year central bank will reach 3.3-3.4%.

CICC believes that Shibor floating rate debt is still the best configuration type.

In the recent 3 months, Shibor has surged to over 4%. Looking forward to the whole year of 2011, when liquidity trend is tightened, Shibor will be difficult to go up and will remain at a historical high. It is suggested that investors can firmly hold the floating rate debt.