On June 10, the General Office of the CPC Central Committee and the General Office of the State Council issued the Circular on the issuance of Special Local Government Bonds and supporting Project financing (hereinafter referred to as the "Circular"). From the reasonable definition of financial support standards, highlight the focus of financial support, provide supporting financing support, broaden the capital channels of major projects, guarantee debt repayment responsibility, and so on, put forward systematic policy measures. We will support the financing of special bond projects. As soon as the policy comes out, it will drive the futures market to float red in an all-round way. The notice boosts infrastructure construction, and rigid demand for building materials is again strongly supported in the third quarter.

First, "allowing special bonds to be used as capital for major projects that meet the requirements" broadens the scope of use of special bonds that can only be used as supporting funds in the past.

Second, "resolutely curb the increase of hidden debt, resolutely do not take the road of disorderly borrowing for construction, at the same time, increase the intensity of counter-cyclical adjustment" shows that the state releases the signal of stable growth and the warming of counter-cyclical policy, and the rhythm of external shock is speeding up.

3. "for major projects supported by special bonds, which are in line with the major decisions and arrangements of the central authorities and have a greater demonstration driving effect, mainly railways, national highways supported by the state, and local highways, power supply and gas supply projects that support the promotion of the major national strategy, after evaluating the income of the project to repay the principal and interest of the special bond, the special income meets the financing conditions. Some special bonds are allowed to be used as a certain proportion of project capital, but must not exceed the actual level of project income over-financing ", the policy-oriented areas are mainly focused on the infrastructure sector. Statistics show that a total of 157.945 billion yuan of special bonds were issued in May, an increase of 63.418 billion yuan over April. At present, the remaining amount of special bonds is 1.58 trillion. Considering that the proportion of special bonds in the designated capital construction direction is about 15 to 30 percent, the funds available for infrastructure construction in the special bonds are about 237 billion to 474 billion. As only major projects that meet the requirements of the document can be used as capital, it is estimated that according to the proportion, the capital can be increased by about 1185-237 billion. At present, the capital requirement for infrastructure projects is about 20-25%, and the scale of new infrastructure investment may eventually reach 500 billion-1.2 trillion.

Fourth, "all localities should balance the timing of the issuance of special bonds and strive to complete the issuance by the end of September of that year." this means that the state intends to speed up the issuance of local bonds, and a total of about 1.74 trillion of the special bonds will be issued from May to September. In order to achieve this goal, it is expected that the volume of local bond issuance in June will reach more than 600 billion yuan, and the monthly issuance scale is expected to reach a new high in the year.

On the whole, the time of local bond issuance in 2019 is ahead of schedule, changing the previous situation of uneven local bond issuance and low issuance at the beginning of the year; the accelerated pace of local bond issuance indicates that the state has released signals of warming counter-cyclical policies, which will help to further hedge the downward pressure on the economy and boost market investment confidence. The policy focuses on infrastructure, railways, high-speed, public utilities (electricity, gas, etc.), which is expected to drive investment in related industries for a long time, and the rigid demand for building materials will be re-supported in the third quarter. However, due to the existence of a certain construction cycle of infrastructure itself, coupled with certain time delays in the availability of capital and supporting funds, and the seasonal decline in demand, steel prices may not be driven immediately in the short term [SMM Steel]