This year has witnessed an exceptional surge in the performance of ultra-long-term government bond ETFs, with a rapid expansion in scaleOn July 30, the "Bosera SSE 30-Year Treasury Bond ETF" experienced a considerable jump, reaching an initial price of 104.486 yuanSimilarly, the "Pengyang China Bond 30-Year Treasury Bond ETF" soared to 115.989 yuan, both hitting historic highs.

Lou Feipeng, a researcher at China Postal Savings Bank, highlighted that the recent intensification of monetary policies aimed at stabilizing economic growth has led to a widespread reduction in policy and loan market quoted interest ratesAdditionally, the need for macroeconomic policies to further bolster the achievement of annual economic and social development goals has amplified this trendIn this context of a "scarcity of quality assets," investors are increasingly turning to government bonds for investment

This collective confluence of factors has contributed to the decline in yields on government bonds, especially the ultra-long-term varieties, resulting in an appreciable increase in the prices of related ETFs.

From the perspective of Liu Xiangdong, chief analyst at Dongyuan Investment, several reasons explain the continuous breaking of records for ultra-long-term government bond ETFsTo start, China finds itself in a low-interest-rate environmentIn contrast, Europe began its rate-cutting cycle in June, while the United States is also poised to potentially ease its interest ratesInvestor sentiment anticipates a greater probability of the Chinese central bank further lowering its policy rates, which has directly driven up the prices of government bond ETFs.

Additionally, amid escalating global economic uncertainties, the demand for safe assets has intensifiedCurrently, high-quality assets are relatively scarce, and government bonds are favored by investors for their low-risk profile and stable yields

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These dynamics have propelled the prices of bond ETFs upwardFurthermore, as institutional and individual investors grow more acquainted with and accepting of government bond ETFs, the influx of capital accelerates, bolstering prices even further.

Yuan Lihui, the director of the Financial Development Research Institute at Nankai University, argued that government bond ETFs offer several advantages over direct purchases of ultra-long-term special treasury bondsThese include superior liquidity, diversified investment, ease of trading, minimal tracking errors, and lower investment barriersFor instance, an individual investor can purchase a 30-year Treasury bond ETF with a minimum transaction size of 100 units, which equates to approximately 10,000 yuan.

Liu Xiangdong further explained that government bond ETFs are traded on exchanges, allowing investors to buy and sell at their convenience and enjoying better liquidity

Conversely, ultra-long special treasury bonds usually necessitate purchase upon issuance, leading to relatively low secondary market liquidity and potentially significant bid-ask spreadsMoreover, investing in a government bond ETF effectively means holding a diversified portfolio of numerous government bonds, thus mitigating investment risksIn contrast, purchasing a single bond entails concentrated risk and lacks the advantage of diversificationThe management fees for government bond ETFs are generally lower, which aids in reducing long-term holding costs for investorsFurthermore, in comparison to direct purchases of multiple individual bonds, investing in a government bond ETF can entail lower overall expenses.

As a relatively new product, retail investors venturing into ultra-long-term government bond ETF investments should exercise rational investment practicesA representative from Pengyang Fund emphasized that investors must fully understand the risk-return characteristics of these products along with their own investment needs

While ultra-long-term government bonds clearly serve functions for long-term allocation and trading, they are not suited for liquidity-driven investments seeking short-term high success ratesA long-term investment approach is likely to yield superior experiences and capitalize on the benefits provided by long durations and high coupon rates.

Moreover, as a class of ultra-long-term interest rate assets, the pricing of these ETFs is complex and influenced by various factors, including economic fundamentals, liquidity conditions, monetary and fiscal policies, bond market supply and demand, valuation, and sentiment across marketsFor trading investors, thorough market research becomes paramount.

Industry experts postulate that, in the long term, the demand for clearly defined and structured financial products is on the riseThese components must also align with the policy directions of the financial sector