Jumbo CD’s Heat up as Yields for Bank WMP’s Continue to Decline

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Large-denomination certificate of deposit (CD) are providing increasingly robust returns as yields on bank wealth management products (WMP’s) continue to decline.

Data from PY Standard indicates that Chinese banks issued a total of 2064 bank WMP’s (including closed-end expected yield WMP’s, open-end expected yield WMP’s and net value products) during the week from 16 – 22 March.

The average yield for closed-end expected yield yuan-denominated products was 4.23%, for a rise of 0.01 percentage points compared to the preceding week, but a decline of nearly 13% compared to the average return of 4.86% for the same period last year.

Rong Huimin (杨慧敏), analyst with Rong360, told state-owned media that returns on bank WMP’s had fallen for 12 consecutive months to hit their lowest level in 22 months.

“Because there are still strong expectations of loosened liquidity in 2019, there is still the possibility of a decline in bank WMP yields.”

In sharp contrast returns on jumbo CD’s are seeing a rise in certain quarters, and in some cases exceeding yields for bank WMP’s.

The rates for three-year large-denomination CD’s from Agricultural Bank of China (ABC) and China Construction Bank (CCB) are 4.125%, as compared to expected annualised yields of 3.65% and 4.05% for the one-year WMP’s sold by ABC, and an expected yield of 4% for CCB’s one-year WMP.

Other big state-owned banks are also raising yields for jumbo CD’s, with ICBC lifting its rate 48% above benchmark and providing a maximum rate of 4.07% for three-year maturities.

Bank of China’s jumbo CD’s provide returns up to 45% above benchmark, for a maximum rate of 3.9875% for three-year maturities.

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