On Wednesday, May 22, 2024, the introduction of ultra-long-term special government bonds officially took the market by storm, marking a notable event in the financial landscape. The first bond, known as "24 Special National Bond 01" (019742), greeted traders with immediate volatility, prompting temporary trading halts within mere minutes of opening. As this extraordinary day unfolded, the bond's yields exhibited a dramatic decline from an initial 2.57% to as low as 1.5%, indicating a fervent demand from investors amidst a backdrop of what many experts deem to be an “asset shortage” in the market.

The trading day began with a stark demonstration of excitement from investors. Just moments after the bell rang, "24 Special National Bond 01" hit the brakes as it triggered a temporary trading suspension due to abnormal fluctuations observed by the Shanghai Stock Exchange. Following a brief pause, trading resumed, only to come to another standstill shortly thereafter. This time, upon resumption, the bond saw its value spike by 25% within just nine minutes. As a testament to the bond's popularity, trading resumed once more at 3:27 PM after a second intervention, showcasing just how fervently investors were seeking this new opportunity.

Further down the market, the Shenzhen Stock Exchange also mirrored this enthusiasm with its own issuance, "Special National Bond 2401" (102267). It experienced a significant rally, lifting its price by over 13% during trading hours before also facing a temporary trading halt due to fluctuations exceeding 10% from the previous closing price.

What set this particular bond apart was its 30-year maturity with a fixed interest rate of 2.57%, which pays interest semi-annually. Detailed stats revealed that the trading volume of "24 Special National Bond 01" settled at an impressive 16,200 contracts after the first temporary suspension, priced at nearly 125 yuan per bond. Similarly, "Special National Bond 2401" captured admirable interest, with its trading volume pausing at a staggering 2.5 million contracts, seeing prices rally from the base of 100 yuan to about 113 yuan. As the trading atmosphere sizzled with demand, yields for both bonds saw a notable dip.

The excitement didn't just materialize on the trading floors; it was echoed at bank counters earlier that week when these ultra-long-term government bonds went on sale. Starting from May 20, many banks began facilitating purchases, with queues forming almost instantaneously as investors clamored for access. Some branches reportedly sold out their allocated amounts within an hour, illustrating clear investor enthusiasm. Managers at various financial institutions noted that while institutional investors were the primary buyers, a noteworthy portion of individual investors eager to tap into this opportunity also entered the fray.

Interestingly, this frenzy for ultra-long-term bonds embodies larger economic narratives at play. As analysts surveyed the landscape, they pointed towards the phenomenon labeled as “asset shortage.” Financial experts argued that these new bonds offer superior attributes compared to traditional fixed-term deposits. With a yield that slightly outstripped the majority of 3-year term deposit products and better liquidity than such accounts, there was a compelling reason for both institutional and individual investors to place their confidence in government bonds as a more stable investment.

From the institutional side, researchers presented insights that banks predominantly comprised the major fraction of buyers—accounting for approximately 70-80%—followed by insurance companies and non-legal entities rounding out the rest. Financial strategists noted that the inflating demand from banks stemmed from an effort to leverage the current market climate effectively, where loan growth is tapering while the opportunities to invest in 30-year bonds represent an attractive risk-return profile.

However, the unfolding scenario did not escape cautionary foresight. Experts remained vigilant about the rate risk associated with these bonds. Unlike traditional savings bonds, which are held to maturity, these government bonds are subject to market-price fluctuations, meaning investors may incur losses if they choose to sell before maturity. This raises the stakes for potential buyers who must weigh the benefits against possible exposure to market dynamics.

While some investors may perceive these bonds as a steady long-term income avenue, seasoned financial analysts warned that the looming possibility of rising interest rates could significantly impact bond prices negatively. This becomes particularly relevant if investors find themselves in a position where they are locked into low-yield bonds while the market evolves around them.

As 2024 progressed, the debt market continued to showcase fluctuations. The initial quarter reported a notable drop in the yield of ten-year treasury bonds, with figures dipping from 2.56% to 2.29%, while the 30-year bonds demonstrated a similar decline. However, as the months rolled on, and negative factors began to dissipate, yields saw a slight rebound.

In conclusion, the initial trading of ultra-long-term special government bonds in May 2024 stands as a demonstration of not only investor interest but also the complexities of market engagement in a climate marked by both low yields and unprecedented demand fluctuations. Investors are advised to keep a close eye on the market and reassess their strategies in the face of an ever-changing interest rate environment.