Rising oil prices create short-term disruptions, with limited impact on the bond market

BoC Development Bank Bond ETF Bosera (159650) Fund Manager Lü Ruijun

Last Friday (March 13), interbank liquidity remained plentiful, with major funding rates edging slightly lower. On that day, the central bank conducted net drainage of CNY 7.3 billion. This Monday, liquidity conditions were relatively stable and still loose; funding rates stayed at a low level, and on that day the central bank conducted net injections of CNY 88.8 billion. In addition, on that day the central bank carried out a CNY 500 billion 182D outright buyback reverse repurchase operation. This month, CNY 6.0 trillion of 182D outright buyback reverse repurchase operations will mature, resulting in net drainage of CNY 100.0 billion. On Tuesday this week, liquidity conditions continued to be stable and loose; major repo rates were low and fluctuated. On that day, the central bank conducted net injections of CNY 11.5 billion. On Wednesday this week, liquidity conditions continued to be stable and loose; major repo rates saw relatively limited fluctuations. On that day, the central bank conducted net drainage of CNY 6.0 billion. On Thursday this week, liquidity conditions continued to be stable and loose; on that day, the central bank conducted net injections of CNY 238.5 billion. Compared with last Friday (March 19), DR001 closed at 1.32% and DR007 fell by 3 bp to close at 1.43%.

Overseas, the Federal Reserve’s FOMC statement and Powell’s press conference said that the Federal Reserve maintains the target range for the federal funds rate at 3.50%-3.75% unchanged, which is in line with market expectations. Despite many challenges, the U.S. economy has remained strong; the economy is expanding, and the impact of developments in the Middle East is still unclear. Rising energy prices will push up overall inflation; it is still too early to judge the magnitude. Powell said the policy rate is at the high end of the neutral range, or is slightly tightening. If inflation shows no progress, the Fed will not cut rates. Most people do not believe rate hikes are the base-case expectation.

Domestically, economic data for the first 2 months showed an overall improvement. In particular, infrastructure investment rebounded markedly, and fixed investment rose from a low level. However, the real estate market sentiment remained relatively low, residents’ consumption was generally weak, and the momentum for economic recovery needs to be strengthened. This year, the fiscal policy will continue to lead with proactive efforts, which provides some support to the economy in the short term. Especially, in the first 2 months, the cumulative year-on-year growth rate of infrastructure investment rose from -15.2% in December last year to 9.8%, thereby driving overall fixed investment. Since March, conflicts in the Middle East have escalated geographically, international crude oil prices have risen sharply, and related energy and chemical industry chain prices have been pushed up. Although the rise in oil prices and PPI being above expectations may have a larger impact on equities and commodities, bonds may be affected relatively less. The core reason is that this round of price increases is mainly driven by supply-side factors. Such price increases usually cannot be transmitted to the consumption side. We expect that the year-on-year CPI may still be relatively weak in the following period, and the domestic low-inflation pattern may not change. Therefore, we believe the rise in oil prices is more of a short-term disruption, and demand may move downward. We continue to like the domestic bond market and may consider actively allocating.

BoC Development Bank Bond ETF Bosera (159650) invests in development bank bonds in the interbank market. Policy-based financial bonds have high credit ratings, large issuance size, and good liquidity, making them a worthy investment target. Therefore, the product of BoC Development Bank Bond ETF Bosera (159650) features good liquidity, low credit risk, and relatively low volatility. The risk-return profile is reasonable. It supports cash subscription and redemption and offers flexible trading in the exchange, making it a good tool for short-duration allocation.

Disclaimer:

All information in this report is sourced from publicly available materials. We do not make any guarantees regarding the accuracy or completeness of such information. In any event, the information or opinions expressed in this report do not constitute any actual investment results of our company, nor do they constitute any investment advice to any investor.

Unless otherwise specifically indicated, the data sources in this report are all from Wind, Bloomberg, or the macro strategy department of Bosera Fund Management.

The copyright of this report belongs to Bosera Fund Management Co., Ltd.

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Bosera CCDC 0-3 Year Policy Bank Bond ETF 159650 Risk level: Medium-Low

Risk Disclosure Statement

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Before making an investment decision, please read carefully the fund contract, the fund prospectus, and product legal documents such as the fund product summary, in order to fully understand this fund’s risk-return characteristics and product features, seriously consider the various risk factors that may exist for this fund, and, based on factors such as your investment objectives, investment horizon, investment experience, and asset situation, fully consider your own risk tolerance. After understanding the product information and the sales appropriateness opinions, make a rational judgment and a prudent investment decision.

Pursuant to relevant laws and regulations, Bosera Fund makes the following risk disclosures:

I. Depending on the different investment targets, funds are divided into different types, including stock funds, hybrid funds, bond funds, money market funds, fund-of-funds, commodity funds, and others. If you invest in different types of funds, you will obtain different expected returns and will assume different degrees of risk. Generally speaking, the higher the fund’s expected return, the greater the risk you bear.

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III. You should fully understand the differences between savings methods such as regular periodic investment and zero-deposit periodic saving. Regular periodic investment is a simple and easy investment method that guides investors to make long-term investments and averages the investment cost, but it cannot avoid the inherent risks of investing in funds, cannot guarantee that investors will obtain returns, and is not an equivalent wealth-management substitute for savings.

IV. The fund manager undertakes to manage and use the fund assets in accordance with the principles of honesty and creditworthiness and diligence and responsibility, but does not guarantee that this fund will definitely be profitable, nor does it guarantee the minimum returns. The fund’s past performance and the level of its net value do not imply how the fund will perform in the future. The performance of other funds managed by the fund manager does not constitute any guarantee of this fund’s performance. Bosera Fund reminds you of the principle of “buyer beware” in fund investing. After you make an investment decision, the investment risks arising from changes in fund operating conditions and the fund’s net value are borne by you. The fund manager, the fund custodian, the fund sales institutions, and related entities do not make any promises or guarantees regarding fund investment returns. The investment scope of this fund includes stocks lawfully issued and listed (including the Small and Medium Board, ChiNext, STAR Market, and other stocks approved for listing by the China Securities Regulatory Commission) and others. The special risks of STAR Market stocks include liquidity risk, delisting risk, and concentration risk of investments, among others.

V. 【Bosera CCDC 0-3 Year Policy Bank Bond Transaction-Open Index Securities Investment Fund】 (hereinafter referred to as “this fund”) is applied for and raised by Bosera Fund (hereinafter referred to as “the fund manager”) in accordance with relevant laws and regulations and the agreed terms, and is approved for registration by the China Securities Regulatory Commission (hereinafter referred to as “CSRC”). The fund contract, the fund prospectus, and the fund product summary of this fund have been submitted to and disclosed through the CSRC fund electronic disclosure website

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