CITIC Securities | No worries about cross-season funds, interest rate decline and spread stabilization

Byline | Zeng Yu · Shang Xiaoqen

This week, the central bank injected larger net liquidity during the latter half of the week. Cross-quarter liquidity pressure was limited, and overall money market conditions were relatively loose. In terms of bond market supply, the net redemption volume of interbank certificates of deposit this week was smaller than in the prior two weeks. Treasury bonds saw a modest net injection, policy bank bonds saw a modest net redemption, and local government bonds recorded net injections for five consecutive weeks. For interest rate bonds, yields moved overall lower this week, the yield curve flattened, and the term spread fell overall. For credit bonds, credit bond spreads this week showed a structural repair rally overall, with clear divergence by maturity and product type. For convertibles, by price, this week all rose except the low-price index, which fell slightly; by size, the convertible large-cap index declined somewhat, while small-cap and mid-cap indices rose to varying degrees.

Money market

DR001 and DR007 were 1.3179% and 1.4398%, respectively, changing by -0.28 bp and +1.89 bp from the prior week’s close.

Bond market supply

This week, net issuance of interbank certificates of deposit was -2241.70 billion yuan, of which state-owned banks, joint-stock banks, and city commercial banks recorded net issuance of -1370.40, 203.10, and -726.40 billion yuan, respectively; the average issuance yield was 1.53%, with the average issuance yields for state-owned banks, joint-stock banks, and city commercial banks at 1.48%, 1.54%, and 1.56%, respectively. This week, net issuance of interest rate bonds was 2059.47 billion yuan; net issuance for central government bonds, local government bonds, and policy bank bonds was 948.10, 1305.97, and -194.60 billion yuan, respectively.

Interest rate bonds

The yields of 1-year, 3-year, 5-year, 7-year, 10-year, and 30-year government bonds closed at 1.25%, 1.32%, 1.55%, 1.68%, 1.82%, and 2.35%, respectively, changing by -0.50 BP, -2.23 BP, -0.98 BP, -1.21 BP, -1.27 BP, and -3.84 BP versus last week.

Credit bonds

The 1Y, 3Y, 5Y, 7Y, and 10Y AAA short-term note spread values were 14 BP, 19 BP, 21 BP, 29 BP, and 31 BP, respectively, changing by 0 BP, 0 BP, -2 BP, -1 BP, and -3 BP versus last week.

Convertibles

By price, this week all rose except the low-price index, which fell slightly; by size, the convertible large-cap index declined somewhat, while small-cap and mid-cap indices rose to different degrees; by credit, the percentage changes for convertibles AAA, AA+, AA, AA-, and below indices were -0.28%, +1.67%, +1.12%, and +0.38%, respectively.

Overseas bond market

This week, the U.S. 10-year, 5-year, 2-year, and 1-year Treasury yields were 4.44%, 4.06%, 3.88%, and 3.77%, respectively, changing by +5 BP, +5 BP, +0 BP, and -3 BP versus last week. Germany, Japan, and the UK 10-year Treasury yields were 3.11%, 2.29%, and 4.77%, respectively.

Overseas market recession risk: Prolonged inflation and the Russia-Ukraine conflict have created significant negative impacts on overseas markets. Overseas recession risk and the risk of deglobalization are not easy to detect, and market risks from overseas monetary policy, fiscal policy, trade policy, and others may also be overlooked.

Geopolitical conflict risk: The Russia-Ukraine geopolitical conflict may intensify and expand. The ongoing conflict between Israel and Palestine may continue, which could lead to large fluctuations in global financial markets, and may even give rise to systemic risk.

Domestic economic risk: As steady-growth policies are continuously rolled out and the process of broader credit is continuously advanced, government bond supply is abundant. If broader credit accelerates further, it will raise market risk appetite; investors will demand higher risk-adjusted return yields, pushing up bond yields and causing prices to fall.

Timeliness of data collation: This article focuses on data related to the bond market. The specific data are updated to the latest figures disclosed in the database, but there is still a risk of updates not being timely and database data being adjusted.

FX risk: In recent years, the USD-to-CNY exchange rate has fluctuated significantly. Improper hedging can result in higher costs due to exchange-rate movements, shrinking returns and leading to losses.

Security research report title: “No Worries on Cross-Quarter Funding, Yield Declines and Spreads Flatten — Weekly Report on Fixed Income 20260328”

External release date: March 29, 2026

Report issuing organization: CITIC Securities Co., Ltd.

Report analysts:

Zeng Yu SAC ID: S1440512070011

Shang Xiaoqen SAC ID: S1440523100003

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