(Yicai) Nov. 19 -- The impact of Chinese lenders' selling bonds to achieve floating profits at the end of the year will not be as significant as market participants worry, according to multiple analysts.

Banks' need to sell bonds has significantly stabilized this year, so the actual impact on the market is limited, the analysts told Yicai. The situation reflects the ongoing pressure on lenders due to the lack of high-quality investable assets and the continued strong demand for buying bonds, they added.

The end of the year is usually when banks conduct business performance evaluations and realize profit targets, industry insiders previously said. They may lock in profits and boost business performance by "selling bonds to realize floating profits", which could trigger fluctuations in the bond market, they pointed out.

"The most concerning issue is whether banks selling bonds will lead to a rapid rise in yields and even trigger a secondary market adjustment," a source from the trading department of a major state-owned lender told Yicai. However, such needs have clearly stabilized, he noted.

On the one hand, the bond market's volatility in the first three quarters has resulted in narrowed floating profits of bonds, the source said. On the other hand, the weak credit demand and continued pressure from "asset shortage" make banks more inclined to buy more bonds rather than sell them intensively, he added.

Banks sell bonds at the end of the year mainly to ensure a stable growth rate of profits at their head offices and to achieve various departments' business performance targets, said Ming Ming, chief economist of Citic Securities. However, based on the financial reports of listed lenders, the proportion of bonds in the other comprehensive income account has increased, so the need to sell bonds is relatively limited, Ming pointed out.

The credit loan supply of banks usually weakens seasonally in the fourth quarter, and they will put more available funds into financial investments, according to Changjiang Securities' fixed income team led by Zhao Zenghui. In addition, their cost of debt is declining, opening up some space for buying bonds, it added.

If the issuance pace of government bonds slows down this quarter, it will relieve the pressure on banks in terms of passive acceptance of government bonds and duration, thus opening up some space for banks to actively buy bonds, the team noted.

China's bond market has performed steadily, with the up or down moves of the CSI Aggregate Bond Index at only 0.5 percent in the month ended Nov. 18, which is a low volatility that indicates an overall stable market sentiment. The yield of the 10-year active treasury bond has been fluctuating in the 1.8 percent range, with up or down moves of about three basis points over the past month.

According to the financial reports and custody data of listed banks, state-owned and rural commercial lenders were the main bond buyers in the first nine months of this year. In addition, the bond holdings of many listed banks jumped by over 20 percent, while those of small and medium-sized lenders rose by more than 15 percent.

"We mainly focus on stable returns, and trading is just a supplementary means," a person from the bond investment department of a major bank said to Yicai.

However, small and medium-sized banks have relatively prominent trading attributes, with some still relying on selling old debts to achieve floating profits. However, the overall impact on the market is controllable.

"At the end of the year, we may do a small amount of old bond replacement to ensure stable income on the asset side and take into account the pressure of year-end performance assessment," noted a person from the investment department of a rural commercial bank.

Banks still have a certain need to realize investment returns this quarter, but the impact on the bond market will likely be relatively mild, Zhao's team pointed out. It's difficult for this to lift yields, but it may pose some hindrance to the development of the market's recovery, it said.

The bond market will continue to experience low volatility and stable returns in the fourth quarter, according to multiple analysts. Guotai Haitong Securities' fixed income team predicted that the yield of 10-year treasury bonds will fluctuate within the 1.75 percent to 1.85 percent range.

Editor: Martin Kadiev