The first batch of savings treasury bonds (electronic type) following the latest round of deposit interest rate adjustments will be available for sale on June 10th. Compared with previous issues, the annual coupon rates of the 3-year and 5-year varieties of this year’s savings treasury bonds are 1.63% and 1.7% respectively, both showing a decrease of 30 basis points from the previous issuance rates.
This indicates that the decline in the interest rates of savings bonds is more significant than that of the new round of benchmark deposit interest rates launched by major state-owned banks on May 20th. However, as the self-discipline upper limit for deposit interest rates has moved downward, savings bonds still maintain an advantage over bank deposits in terms of interest rates. According to a reporter from First Finance, after field investigations, it was found that despite the interest rate cuts, the online sales of these two issues of savings bonds remained extremely popular. Some banks’ mobile banking platforms even experienced out-of-stock situations, while the enthusiasm for counter purchases was relatively lower than before. Overall, the 5-year savings bonds were more sought-after than the 3-year ones.
Online Sales Boom
“All online quotas have been exhausted. You can only try to purchase at the counter,” several customer managers from major state-owned banks and joint-stock banks told the reporter when the reporter inquired about buying savings treasury bonds as an investor on the morning of the 10th.
According to a notice from the Ministry of Finance, the third issue of savings bonds (electronic) (bond abbreviation: 25 savings 03) and the fourth issue of savings bonds (electronic) (bond abbreviation: 25 savings 04) will be issued from June 10th to June 19th. Both are fixed-rate and fixed-term bonds. The third issue has a 3-year term, a face annual interest rate of 1.63%, and a maximum issuance amount of 25 billion yuan. The fourth issue has a 5-year term, a face annual interest rate of 1.7%, and a maximum issuance amount of 25 billion yuan.
Compared with certificate-type savings bonds, residents have more flexible options when purchasing electronic savings bonds, as they can choose to buy them either at bank counters or through online channels. However, due to the limited online sales quota on the first day of issuance, competition is fierce when the market is hot, and those who are slow often miss out.
“A single one of my clients failed to purchase successfully through the mobile app; they all bought at the counter,” said a staff member from a major state-owned bank in Beijing. On the morning of the 10th, the reporter observed on the mobile banking platforms of several banks that the newly launched 5-year savings treasury bonds were all sold out.
Take Industrial and Commercial Bank of China as an example. Its mobile banking page showed that as of 8:46 am on the 10th, the available sales amount for the 25 Savings 03 through the electronic banking channel was 0 yuan. As of 8:31 am on the 10th, the available sales amount for the 25 Savings 04 through the electronic banking channel was also 0 yuan, meaning the 5-year savings treasury bonds were sold out online within one minute. The online channels of other banks, such as Construction Bank and China Merchants Bank, also sold out most of the 5-year savings treasury bonds early. The consumption of 3-year treasury bond quotas was slightly slower than that of 5-year ones.
For instance, as of around 8:50 am on the 10th, the available sales quotas for Savings Account 25 03 and Savings Account 25 04 on China Merchants Bank’s mobile banking platform were approximately 50 million yuan and 0 yuan respectively. The mobile banking of China Construction Bank showed that the maximum sales quotas for both treasury bonds of the bank were 1.09 billion yuan. As of 8:50 am on the 10th, the available sales quotas for the 3-year and 5-year varieties were 335 million yuan and 0 yuan respectively. By midday, all these treasury bonds had been sold out.
As of around 1 p.m. on that day, the mobile banking of Bank of Communications showed that both phases of savings treasury bonds had been sold out. The mobile banking of Postal Savings Bank showed that the remaining balance of the 25 savings 03 electronic channel was approximately 308 million yuan, and the remaining balance of the 25 savings 04 electronic channel was approximately 118 million yuan.
“A staff member from a Beijing branch of China Merchants Bank said, “On the first day of sale, there is an upper limit on online purchases. The counter has a more abundant supply, but the total amount is shared nationwide. You can give it a try. Currently, there are still over 300 million yuan available for the 3-year term and over 100 million yuan for the 5-year term.” Before the launch of the two treasury bond varieties, the available amounts shown in the bank’s system for both were 700 million yuan. As of around 12:00 noon on that day, the available amounts at the counter were still relatively sufficient.
According to the Ministry of Finance’s notice, the two tranches of treasury bonds will be sold by members of the 2024 – 2026 savings bond underwriting group, including 40 banks such as state-owned major banks, joint-stock banks, and urban and rural commercial banks. Among them, underwriting group members that have opened electronic channels for selling savings bonds (electronic type) (including mobile banking and online banking) will sell through both branch counters and electronic channels, while other underwriting group members will sell only through branch counters. Each individual secondary custody account for treasury bonds can purchase no more than 3 million yuan for each tranche.
In terms of the agency sales ratio, state-owned major banks remain the main force in government bond agency sales, and the initial basic agency sales quota ratio remains basically the same as before. Among them, the initial basic agency sales quota ratios above 10% include Industrial and Commercial Bank of China, Agricultural Bank of China, Construction Bank, and Postal Savings Bank. Among joint-stock banks, China Merchants Bank has a relatively high initial basic agency sales quota ratio of 4.1%. Among urban and rural commercial banks, Jiangsu Bank (1.91%), Beijing Bank (1.72%), and Beijing Rural Commercial Bank (3.71%) have relatively high agency sales quota ratios.
According to relevant regulations, on June 10, the first day of sale, the upper limit of the quota for underwriting group members to sell the two treasury bonds through electronic channels was 40% of the initial basic underwriting quota for the treasury bonds in that period. From June 11 to June 19, underwriting group members with electronic channels can fully utilize the obtained quota and reasonably allocate the proportion of quotas for each channel. After business hours end on June 13, the unsold basic underwriting quotas of each underwriting group member will be verified with the Central Treasury Bond Registration and Clearing Co., Ltd., and then all reduced to zero. The reduced basic underwriting quotas will be included in the flexible underwriting quotas and will be available for each underwriting group member to claim starting from June 14, 2025.
Interest Rate Trends and Comparison
Compared with the mainstream fixed deposit interest rates of state-owned major banks and some joint-stock banks, savings bonds still have an edge in investment returns. Due to their high safety, stable returns, flexible redemption features, and low investment threshold, phenomena such as the “instant sellout” of savings bonds have been common in the past. With the continuous decline in interest rates, the group of buyers is expanding from the elderly to the young.
Feedback from staff at multiple banks shows that while online transactions are still very active, the enthusiasm for offline subscription of the latest two issues of savings bonds has declined slightly compared to before. Due to differences in customer traffic and other factors among branches in different regions, there are also some variations.
A customer manager from an Industrial and Commercial Bank of China branch in Chaoyang District said that there were not many customers coming to the counter to buy government bonds in the morning of that day, so the available quota was still sufficient. “There were about seven or eight customers queuing (to buy government bonds) at our branch in the morning,” a customer manager from a Construction Bank branch in Fengtai District said. A staff member from a Construction Bank branch in Chaoyang District stated that by around 10 a.m., customers needed to queue up to buy government bonds at that branch, “with about a dozen customers waiting.” According to the customer manager, as of midday that day, the available quotas for the 25 Savings 03 and 25 Savings 04 at the Construction Bank counter were around 600 million yuan and 100 million yuan respectively.
Entering the low-interest-rate era, residents’ choices for financial management are becoming increasingly challenging. Compared with the latest round of deposit interest rate cuts, the interest rates of the two newly issued savings bonds have decreased even more. However, compared with bank time deposits, savings bonds still maintain their interest rate advantage.
On May 20th, when the latest LPR (Loan Market Quotation Rate) was lowered, major state-owned banks announced a new round of deposit rate reduction. The 3-year and 5-year fixed deposit rates were each lowered by 25 basis points, and after the adjustment, they dropped to 1.25% and 1.3% respectively.
However, from the perspective of the actual execution interest rates of various types of deposits, compared with the previous situation where the maximum increase could be 40 basis points above the benchmark rate, after this round of adjustment, the upward increase range for large banks’ fixed deposit rates has also dropped to 30 basis points. The upper limits for the main types of 3-year and 5-year fixed deposits have decreased to 1.55% and 1.6% respectively, a decrease of approximately 35 basis points compared to before.
Since March, the Ministry of Finance has successively issued two 3-year certificate-type savings treasury bonds, two 5-year certificate-type savings treasury bonds, and one 3-year and one 5-year electronic savings treasury bond. The coupon annual interest rates of the 3-year and 5-year varieties remained at 1.93% and 2% respectively. Based on this, the latest issuance interest rate has decreased by 30 basis points.
Looking at the long-term trend, the annual interest rates of the 3-year and 5-year savings bonds issued by the Ministry of Finance in June 2023 and June 2024 were 2.95% and 2.38% respectively, while for the 5-year bonds, the rates were 3.07% and 2.5% respectively. Calculated based on a subscription amount of 100,000 yuan, the current holding-to-maturity return from purchasing a 3-year savings bond is 4,890 yuan, which is nearly 4,000 yuan less than the return (8,850 yuan) from purchasing and holding to maturity two years ago.
It is worth noting that as the plan to reduce debt costs continues, many banks currently have a shortage of 5-year fixed deposit quotas with interest rate increases. Some have even directly cancelled the interest rate hikes, and the phenomenon of interest rate inversion has become more prominent. On the other hand, the large-denomination certificates of deposit that frequently ran out of quota in the past are losing their interest rate advantage compared to ordinary fixed deposits.
Take Industrial and Commercial Bank of China as an example. Currently, the highest interest rates for 3-year and 5-year fixed deposits at this bank are 1.55% and 1.3% respectively. The interest rate for 3-year large-denomination certificates of deposit is the same as that of ordinary fixed deposits, and the interest rate for 5-year large-denomination certificates of deposit can reach 1.6%, but there is currently no available quota. The customer manager of China Construction Bank also stated that the 3-year and 5-year large-denomination certificates of deposit of this bank no longer have an advantage over ordinary fixed deposits in terms of interest rates, and the mobile banking also shows that there is no quota for the 5-year type.
Currently, the main fixed deposit interest rates of joint-stock banks are still higher than those of general banks, but they are gradually converging towards those of large banks. According to the mobile banking service of China Merchants Bank, the interest rate of the bank’s unique deposit product “Flexible Deposit” for a 3-year term and a 5-year term is both calculated based on the benchmark rate, which is 1.25% and 1.3% respectively. Among other joint-stock banks, some have a 3-year fixed deposit interest rate of up to 1.75%, and a few have a 3-year and 5-year fixed deposit interest rate of up to 1.9% and 1.95%.
According to the notice from the Ministry of Finance, the above two bond issues can be redeemed in advance through the counter at bank branches after the issuance period ends. The bank will calculate and pay interest to investors based on the actual holding days and the corresponding execution interest rate. Specifically, starting from June 10, 2025, if the holding period of the two bond issues is less than 6 months, no interest will be paid for early redemption. If the holding period is between 6 months and 24 months, interest will be calculated based on the face interest rate, and 180 days of interest will be deducted. If the holding period is between 24 months and 36 months, interest will be calculated based on the face interest rate, and 90 days of interest will be deducted. If the holding period of the fourth bond issue is between 36 months and 60 months, interest will be calculated based on the face interest rate, and 60 days of interest will be deducted. At the same time, when the bank processes early redemption for investors, a handling fee of 1‰ of the redeemed principal will be charged to the investors.
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