As we delve into the intriguing world of investment opportunities this year, a notable trend has emerged in the realm of ultra-long-term treasury bond ETFs (Exchange-Traded Funds). These financial instruments have recently seen a meteoric rise in performance and scale, signaling a shift in investor behavior and market conditionsOn July 30th, two standout ETFs made headlines: the "Bosera Shanghai Stock Exchange 30-Year Treasury Bond ETF" peaked at 104.486 yuan, while the "Pengyang Zhongbond - 30-Year Treasury Bond ETF" touched an impressive 115.989 yuan, both marking remarkable historical highs.

The backdrop to this financial phenomenon can be traced to recent monetary policy adjustments aimed at bolstering economic growth in ChinaAccording to researcher Lou Feipeng from the Postal Savings Bank of China, the recent enhancement in policy rates, coupled with a general decrease in loan market quoted interest rates, lays a fertile ground for treasury bond investments

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Such measures are part of a broader strategy to achieve the annual economic and social development targets, with further macroeconomic policy shifts expectedAmid the ongoing "scarcity of quality assets," investors are increasingly turning their attention to government bonds, thus contributing to a decline in yields and a corresponding rise in treasury bond ETF prices.

Industry expert Liu Xiangdong, Chief Analyst at Dongyuan Investment, has identified several key factors fueling this unprecedented demand for ultra-long-term treasury bond ETFsFirst and foremost, the current low-interest-rate environment in China stands in contrast to global trendsAs Europe commenced a rate cut cycle in June and the United States appears poised to follow suit, market expectations suggest a heightened potential for further reductions in policy interest rates by the People's Bank of ChinaThis anticipation directly affects investor sentiment, driving the prices of treasury bond ETFs upward.

Furthermore, in an increasingly uncertain global economic landscape, there has been an upsurge in demand for safe-haven assets

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Treasury bonds, with their low-risk and stable return profiles, are viewed favorably by investors, particularly as high-quality assets become scarceThis growing recognition and acceptance of treasury bond ETFs among institutional and individual investors are further accelerating the inflow of capital, resulting in rising prices for these funds.

For investors, the appeal of treasury bond ETFs compared to directly purchasing ultra-long-term special treasury bonds is compellingAccording to Tian Lihui, director of the Financial Development Research Institute at Nankai University, the advantages of treasury bond ETFs include enhanced liquidity, diversified investment options, ease of transaction, minimal tracking error, and lower investment thresholdsFor instance, individual investors have the opportunity to invest in 30-year treasury bond ETFs with a minimum transaction unit of 100 shares, amounting to roughly 10,000 yuan

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This feature makes entry into the bond market significantly more accessible.

Liu Xiangdong further elaborates in favor of treasury bond ETFs, highlighting their liquidity due to their listing on exchanges, enabling investors to buy and sell at their convenienceOn the other hand, ultra-long-term special treasury bonds typically need to be purchased at issuance, resulting in less liquidity in the secondary market and potential challenges related to significant buy-sell price spreadsBy purchasing treasury bond ETFs, investors essentially hold a diversified portfolio of government bonds, reducing the concentration of risk that might arise from investing in a single bondThe management fees associated with ETFs are generally lower, helping to decrease the long-term holding costs for investors.

This innovative financial instrument, though relatively new, necessitates that average investors approach ultra-long-term treasury bond ETF investments with caution and rationality

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Representatives from Pengyang Fund advise investors to recognize the inherent risks and return characteristics of these funds in relation to their investment goalsWhile the long-term allocation and trading features of ultra-long-term treasury bonds are well-defined, these instruments are not tailored for liquid short-term investments with elevated success ratesA long-term investment approach is encouraged, allowing investors to reap the benefits associated with longer tenures and higher coupon ratesGiven the multifaceted influences on pricing for these ultra-long-term interest rate assets—including economic fundamentals, liquidity conditions, monetary policies, fiscal measures, bond market supply and demand, valuations, and cross-market sentiments—investors engaged in trading need to bolster their market research capabilities.

Looking towards the future, market participants acknowledge a growing demand for clearly characterized financial instruments

The products must align with the financial industry's policy directionBond index funds, including ultra-long-term treasury bond indices as a specific sub-category, showcase substantial growth potentialUltimately, Lou Feipeng cautions investors: while government bonds are inherently considered safe assets, this does not imply that secondary market transactions in government bonds are devoid of riskPrice fluctuations are a normal market phenomenon, and investors seeking to invest in ultra-long-term treasury bond funds must exercise caution and base their decisions on individual risk tolerance and expected returns.

In conclusion, the rise of ultra-long-term treasury bond ETFs illustrates a profound shift in market dynamics fueled by economic policy responses and evolving investor preferencesAs these funds continue to gain traction in the Chinese market, they represent both an opportunity and a challenge for participants seeking stability and growth amidst uncertainty