Jumbo CD Rates Slide as Deposit Rates Fall, Supply Still Falls Short of Demand

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Rates for jumbo certificates of deposit (CDs) in China have fallen amidst ongoing reforms of the country’s interest rate regime, yet demand for the products remains strong due to mounting risk aversion amongst Chinese investors.

In November jumbo CD issuance volumes saw declines, as did the average interest rates for certain tenors, according to Rong360’s “2022 November Bank Jumbo Certificate of Deposit Report” (2022年11月银行大额存单报告).

Jumbo CD issuance volumes have seen steady declines since the start of the year, standing at around 450 million yuan in the first quarter and 300 million yuan in the second quarter, before sliding to approximately 270 million yuan in the third quarter.

At present rates for most jumbo CDs hover between 2 – 3.5%, with the rate for three-year jumbo CDs offered by big state-owned banks hovering at around 3.1%, and 3.25 – 3.5% for those offered by joint-stock lenders.

Rates for the five year jumbo CD saw the biggest decline in November compared to the preceding month, with a 1.2 basis point fall.

In spite of the fall in jumbo CD rates, the products are still highly popular with Chinese investors, with long-term jumbo CDs seeing especially strong demand and some banks running up against their quotas.

“Because there is a limited quota, jumbo CDs at some tenors have sold out completely, and investors have been vying to make purchases,” said one wealth management executive at a joint-stock bank to Securities Daily.

“Over the past two years, there has been considerable pressure on China’s economic growth, and the risk preferences of ordinary people have become conservative,” said Liu Jinping (刘银平), research analyst with Rong360.

“Even though jumbo CD rates remain low, they are principal protected and highly secure, and still viewed favourably by investors. In a period of declining interest rates, purchasing long-term jumbo CDs can lock in comparatively higher rates at present in advance.”