China-Singapore Jingwei Client, April 8 (Wu Yihan, intern Du Lunhui) On April 6, Yu'ebao's 7-year annualized return rate fell below 2.0% for the first time since its establishment, and the return rate of all market currency funds also declined .

Industry insiders said that the decline in economic fundamentals and loose monetary policy are the main reasons for the decline in the yield of monetary funds, and the downward trend of future yields of monetary funds may continue until these are not improved. At the same time, under the demand for risk aversion, the scale of the money fund's yield has decreased while its yield has dropped.

Money Fund Yield Down

On April 6, Tianhong Yu'ebao Monetary Fund's annualized return on the 7th was 1.9780%, which was the first time it fell below 2% since its establishment on May 29, 2013. From the high rate of return of about 7% in 2014, it fell to 4% in previous years, and now it has fallen below 2%. The situation of Yu'ebao's "one day's income can be paid for a breakfast" is like a world away.

Yu'ebao's 7-year annualized return rate (as of April 7th, data source: Flush)

Not only Yu'ebao, but money fund returns across the market have declined. According to the data of Flushing on April 6, there are 746 currency funds in the whole market, only 21 are left on the 7th with an annualized return rate of more than 3%, and 348 are on the 7th with an annualized return rate of less than 2%. Up to 46.6%. The average rate of return of these money funds is only 2.0285%, and the median annualized rate of return on 7 days is 2.0210%.

21 money funds with an annualized return of more than 3% on the 7th (as of April 7th, data source: Flush)

Industry: Monetary fund income decline may continue

In the opinion of the industry, the decline in the yield of monetary funds is affected by the dual impact of economic fundamentals and loose monetary policy, especially the relatively loose monetary policy adopted by the central bank, and the short-term interest rate has a relatively obvious downward trend. Investment income from major asset allocations such as industry deposit certificates and pledged reverse repurchases also declined.

Tianhong Fund said that affected by the new crown pneumonia epidemic, overseas central banks have entered a new round of monetary easing. In this context, the People's Bank of China has also implemented a looser monetary policy and put a lot of liquidity into the financial market.

On April 3, the central bank announced that it decided to lower the deposit reserve ratio by 1 percentage point for rural credit cooperatives, rural commercial banks, rural cooperative banks, rural banks, and urban commercial banks operating only in provincial-level administrative regions. It was put into place twice on May 15th and May 15th, with a reduction of 0.5 percentage points each time, releasing a total of about 400 billion yuan in long-term funds. In addition, the central bank decided to reduce the interest rate for excess deposit reserves of financial institutions in the central bank from 0.72% to 0.35% since April 7. The last reduction in the excess reserve interest rate was in November 2008, which was the central bank ’s The excess reserve interest rate was reduced for the first time after 12 years.

Tianfeng Securities pointed out that interbank certificates of deposit and pledged reverse repurchase are the main allocation assets of currency funds. Since the beginning of this year, especially since the outbreak of the epidemic, China ’s funds have been loosened, and the investment income of the aforementioned money funds has also been reduced. Since January 15, 2020 (before and after the outbreak in China), the decline trend of R007 and R001 is obvious. The interest rate of interbank certificates of deposits also fell sharply. The interest rate for the issue of interbank certificates of deposit in January on January 7 was 1.9154%, a decrease of 92.54BP from January 15, 2020, a decrease of 105.38BP in March and 71.61BP in June. The September period fell by 89.23BP.

Issuing interest rates for various maturity deposit certificates of various types declined (as of April 7, data source: Tonghuashun)

Regarding the future trend of the yield of money funds, industry insiders said that before economic growth shows significant improvement, monetary policy will continue to be loose in the future, and the currency interest rate market will remain low. Will continue.

Wang Dengfeng, the manager of Tianhong Yu'ebao Fund, said that in the future, the yield of money funds will continue to decline slightly, and most money fund products will remain below 2% for a longer period of time. This epidemic has had a huge impact on the global economy as well as the Chinese economy. This year, the country pointed out that it is necessary to further increase macroeconomic policy adjustment and implementation in order to complete the annual economic and social development goals and tasks. Therefore, monetary policy will also cooperate to keep the liquidity of the financial market reasonably ample, and the interest rate in the money market will remain low until economic growth shows a significant improvement.

Yang Yuanchun, research director of the FIF Research Institute of Yingmi Fund, also believes that the world has entered a rate cut cycle. The domestic central bank also made it clear that the monetary policy should increase countercyclical adjustment, and the return rate of currency assets will face a further downward trend. It is necessary to accept the reality that the overall rate of return on this type of assets has declined.

The size of money funds rises under the demand for hedging

Statistics published by the China Securities Investment Fund Industry Association show that although the yield of money funds has fallen, their scale has risen. As of the end of 2019, the size of the money market fund was 7.12 trillion yuan, and then increased month by month. At the end of February this year, the size of the money fund was 8.08 trillion yuan, a sharp increase of 960.552 billion yuan from the end of last year. And since this year, the proportion of money funds in the size of public funds has increased, at the end of 2019 was 48%, as of the end of February this year, accounting for 49%.

The size of the money fund market has increased since the end of 2019 (as of February 29, data source: Flush)

In fact, the scope of investment of money funds is a variety of high safety factors and stable returns, so money funds also have certain hedging properties, plus it also has strong liquidity and has more interest than bank deposit interest. High yield and other characteristics have become the reasons for attracting investors.

Yu Fenghui, an economic and financial expert and an adjunct professor at Huazhong University of Science and Technology, said that at present, money funds are still a good hedging option for ordinary investors. The world has entered a cycle of interest rate cuts. Affected by the epidemic, the era of cash is king has come, but the priority of live money management is the safety and liquidity of assets, followed by the rate of return, which gives money funds opportunities. (Sino-Singapore Jingwei app)

(The opinions in this article are for reference only, and do not constitute investment advice. Investment is risky and you need to be cautious when entering the market.)

All rights reserved by Sino-Singapore Jingwei, without written authorization, no unit or individual may reprint, extract or use it in other ways.