Since late August of this year, the bond market experienced a shift from a prolonged rally to a phase of fluctuation and consolidationHowever, as the year approaches its end, there is a noticeable resurgence in interest and enthusiasm for bond investments.

Journalists have observed that since November, several bond funds have announced the early closure of their fundraising effortsThis uptick in bond fund activity has propelled them to become the leading sector in terms of fundraising volume in the market during this month.

Analysts suggest that there is still room for a decline in bond yields, and after the new year, a wave of demand for allocations is expected.

Revival in Bond Fund Issuance

While public equity products have long struggled with issuance, there are clear signs of recovery within fixed-income products, particularly bond funds.

According to incomplete statistics, as of November, several fund companies, including Minsheng Jiayin, Huafu, Guolian’an, Ping An, Jinxin, Jianneng, and Nongyin Huijin, have closed their bond fund subscriptions ahead of schedule.

Data from Choice Analytics shows that as of November, newly established funds issued a total of 120.064 billion units

Among these, equity funds accounted for 13.897 billion units, with an average issuance of only 347 million units; mixed funds yielded 7.188 billion units, continuing five months of under 10 billion units, with a mere average of 248 million units; however, bond funds led the pack with 97.221 billion units issued, reaching a peak for the year with an average of 1.984 billion units issued.

Bond funds have emerged as the "heavyweights" of new fund formations, with all newly established funds exceeding 4 billion units in November being bond funds, and those above 2 billion units primarily comprising bond funds, with only two being equity ETFs.

In stark contrast, the issuance of equity funds remains lackluster, with ongoing challenges in the marketing of existing products

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According to sales data provided by a channel source, no equity product sold more than 10 million units in November; even those outperforming the CSI 300 Index saw tepid sales, with some falling below 100,000 units.

In contrast, despite being affected by the overall market downturn, some fixed-income products did achieve above 10 million units in sales for the month, particularly those focused on short to medium-term bonds.

"Selling funds is quite challenging, and I worry about not meeting KPIs by the year's end," a sales representative confided, noting that some bond funds perform well predominantly due to institutional allocations.

Yuan Shuai, Deputy Secretary-General of the Zhongguancun Internet of Things Industry Alliance, told reporters that this year has seen a significant seesaw effect between stocks and bonds

Given the substantial fluctuations in the stock market, bonds have become an important choice for investors seeking safety, suggesting there could be further opportunities. As the year ends, there may be a resurgence in capital flows and demand for safety within the bond market, providing some support.

Future Direction of the Bond Market

This year, equity markets have shown overall volatility, leading to poor average performance for equity funds.

According to data from Tonghuashun iFinD, as of November 29, active equity, passive index, and equity-mixed funds all reported negative average net asset value growth for the year, whereas, during the same period, the average net asset value growth for medium to long-term bond funds was 2.99%, with short-term bond funds showing 2.79% growth.

Choice data indicates that the yield on ten-year government bonds peaked at the end of January this year before starting a downward trend, lasting through late August

During this period, the bond market enjoyed a favorable phaseHowever, since late August, the yield has been oscillating between rises and declines and currently sits at 2.67%.

Regarding the bond market's outlook, Xu Juan, Deputy Director of the Bond Investment Department at Nord Fund, expressed a view that there is no need for excessive pessimism looking ahead to 2024.

Xu believes that with the continuing decline in society-wide capital returns, the downward adjustment of the risk-free rate is a high-probability event, which may further create a space for bond yield declines.

Looking ahead to the economic fundamentals for next year, Morgan Asset Management has indicated that due to the effective increase in productivity through automation and artificial intelligence, long-term economic growth forecasts are on the rise, complemented by the emergence of new technologies and energy transitions creating further investment opportunities.

Zhu Chaoping, Chief Market Strategist for Asia-Pacific at Morgan Asset Management, pointed out, "Although emerging market economies continue to show growth advantages over mature market economies, the gap is gradually narrowing