20240826-国联证券-信用周观点_如何挖掘化债下的含权城投债__27页_3mb

报告摘要

how to identify high-yield quasi-cities in the context of debt relief conditions? August 26, 2024 | Key Points | Analysts and Contact Persons
Security Research Report | Special Industry Report | Full Fixed Income Yield

Under the impetus of a comprehensive debt relief policy, some city investment platforms often choose early redemption of existing bonds or sharply cut coupon rates during the put option period to guide investors to exercise their redemption rights. Subsequently, they issue a new low-cost bond to achieve a reduction in financing costs. Since 2024, the zero-lottery market has intensified dramatically, with market interest rates continuously declining. The proportion of quasi-city bonds with reduced coupon rates has significantly increased compared to previous years, and redemption scale accounts for historical highs. Against this backdrop, this report focuses on quasi-city bonds containing both "coupon rate adjustment options" and "put options" (excluding call options), aiming to identify potential redemption opportunities through coupon adjustments.

11 Contingent Redemption Bonds with "Coupon Rate Adjustment Options"
The coupon rate adjustment option is a special clause embedded at the time of bond issuance, granting the issuer the right to adjust the coupon rate under certain conditions. Near the redemption date, the issuer typically decides whether to adjust the coupon rate based on multiple factors. Generally, when market interest rates decline, issuers aim to reduce financing costs by lowering coupon rates. In particular, when paired with redemption terms, the issuer may guide investors to exercise redemption rights by reducing coupon rates, thereby issuing new bonds at lower coupon rates. The coupon rate adjustment option can be divided into "two-way adjustments" and "one-way adjustments." Two-way adjustments do not specify a direction, allowing the coupon rate to increase, decrease, or remain unchanged. One-way adjustments include upward adjustments (can only increase or maintain the original coupon rate, favorable to investors) and downward adjustments (rare, such as 21 Jinwen01). Coupon rate adjustment options are often combined with redemption or call options.
According to our statistics, among quasi-city bonds issued in recent years with a coupon rate adjustment option, the "adjust coupon rate + redemption" combination accounts for 82.67%. This is the focus of this report.

12 Significant Improvement in the Proportion of Coupon Rate Reduction in 2024
As of August 22, 2024, the proportion of "adjust coupon rate + redemption" bonds that chose to reduce coupon rates reached 45.01%, a record since 2018. Accompanying the reduction in coupon rates, the redemption scale accounts for a historical high.

13 How to Handle "Two-Way Coupon Adjustment" Redemption Bonds
For bonds with adjusted or unchanged coupon rates (upward or downward), we focused on underlying credit ratings and implicit ratings. For bonds that did not reduce coupon rates or even increased them, the most significant observation was in Guizhou, Jiangsu, and Shandong. Bonds like 21 Guikong01 and 22 Shiyuan01 saw slight or no adjustments, and redemption proportions remained low.

For bonds with relatively minor coupon reductions, we identified 58 candidates (AA+ and above, implicit ratings AA- and above), with average remaining maturities of 3-4 years and high yield-to-maturity advantages.

14 Handling "One-Way Upward Adjustment" Redemption Bonds
We identified 20 bonds with one-way upward adjustments (planned for redemption before 2025) including 20 Jinjian01 and 22 High Speed Road Bridge MTN001. These offer AAA ratings and high yield-to-maturity advantages in a low-rate environment.

2 Current Market Conditions and Yields
Special Credit Events: August 22 saw a credit rating downgrade for Lining Ecological Culture and its bond.
Yield Curve:

Quasi-city bonds (1Y-30Y): 208–241%
Industrial bonds (1Y-5Y): 220–255%
Financial bonds (1Y-5Y): 197–271%

Primary Market Summary: Credit bond issuance increased by 3.755% in net financing.

Secondary Market Summary: High-yield trades dominated, especially in real estate (up to 348% for 3–5-year bonds).

Risk Highlights: