50-yr CGBs with yield at 4.5% are relatively

50-yr CGBs with yield at 4.5% are relatively attractive to insurers and banks China is scheduled to issue 50-yr CGBs this week, which we believe are relatively attractive to banks and insurers if yields stand at 4.5%.

For insurers, interest rate on 5-yr fixed-rate negotiated loans is around 4.5%, and 30-yr CDB bonds have higher yields than 50-yr CGBs.

For banks, only one 10-yr CGB saw yields of higher than 4.5% since 2000, and only three of China’s ultra
long-term CGBs had a yield of 4.5% or higher. In addition, compared with mortgage loans, ultra
long-term CGBs have higher rate of returns given its tax exemption and zero risk weight.