Papers Category:Fiscal Levy Papers
- National Debt Research Papers
Post Time:2009-8-11 17:09:00
[Paper Keywords] bond market, monetary policy
[Abstract] China's interest rate market-oriented reform experience shows that through the bond market to advance the development of market-oriented interest rate reform is one of the more effective path of reform, from the development requirements of a modern market economy, the real interest rate is to be the benchmark bond market interest rates. This paper presents the recommendations of perfecting China's bond market and measures.
1, the interest rate market on a good bond market
The interest rate market-oriented reform of China's experience shows that through the bond market to advance the development of market-oriented interest rate reform is one of the more effective the reform path. 10 years of China's bond market-oriented reform of interest rates, market-oriented reform has played an important role. Secondary bond market and its yield formation of a bond market, the introduction of competitive tendering mechanism, bond repurchase market interest rates, treasury bond futures trading experiment reform initiatives, is the interest rate market-oriented reform of China's important content, speed up the reform process. In recent years, central bank open market operations to guide the market interest rates, and a variety of interest rate marketization reform measures, are for the final opening deposit and lending rates of commercial banks to prepare the basic conditions. However, as the deepening of China's financial system reform, the process of marketization of interest rates gradually accelerating, the central bank needed to determine a market benchmark interest rates to guide the market interest rate.
The so-called market benchmark interest rate is the coexistence of a variety of interest rate play a decisive role under the conditions of interest rates, financial markets to determine prices of all the financial products an important reference basis is that people recognized and generally accepted reference value has an important interest rates. At present, China's central bank to commercial banks re-lending rate actually plays a role in the benchmark interest rate. However, the development requirements of a modern market economy, the real can become the benchmark interest rate is the bond market interest rates.
First, from the general rules of international financial markets point of view, to become the benchmark interest rate must be a good mobility rate financial products. T-bill rates have this characteristic. Bonds have 'quasi-money' is known, strong liquidity, and its price formation and volatility can be sensitive to reflect changes in market supply and demand of funds, so they can become the basis for pricing other financial instruments. It is true that bonds will be subject to inflation, interest rate and maturity risks, but because of debt maturity debt service is a fixed amount of the inflation rate and interest rate changes can be expected under the conditions of bond, it naturally became the benchmark interest rate interest representatives. In fact, the United States, Japan and other developed market economy, the benchmark interest rate is the bond market interest rates, bond rates in the central part of the entire interest rate system, and its decision to change the interest rate changes in other financial instruments.
Secondly, as the benchmark interest rate, must be able to better reflect the different term interest rates. Treasury interest rates have the advantage. In the bond term structure theory, the expectation theory and the market segmentation theory explains the different sides of different duration bonds, interest rates, reasons for the differences. Theory in the bond is expected to have a complete replacement of the bonds under the premise that the interest rate difference is due to the length of the period is about long-term interest rates before the maturity of the bonds is equal to the expected average of future short-term interest rates. Market segmentation theory in the market is not complete and is not a substitute for bonds with different maturity periods explained under the premise of a variety of term bonds, the bond market interest rates depends on a variety of supply and demand situation. Term Structure Theory and liquidity premium theory, then the combination of these two theories, long-term interest rates until maturity of the bonds is equal to the expected average of future short-term interest rates coupled with supply and demand reflect the different time duration of bond premiums, which more fully explain the different term bonds, the interest rate differential causes. Non-government bonds (such as corporate bonds) interest rate decision, while a different term can also use the above theoretical explanation, but because of the risk of default and therefore can not be used to determine the term structure of interest rates. The main body of bonds with the government, there is generally no risk of default, its default risk structure of interest rates thus not subject to interference, which can reflect the difference in interest rates of various maturities, the benchmark interest rate to be the best option. While interbank rates also reflect market supply and demand of funds rate traded in the market size, the number of transactions and standardization degree, also comparable with the bond market, but after all, just a short-term interbank market, lending market and only a short-term interbank interest rates interest rates are for reference. The bond market is to provide short, medium and long term bonds of different types of markets, may reflect a different term interest rates.
Once the benchmark interest rate bond formation, bond market development on the other financial markets will have a huge impact. It not only changed the pattern of financial market size, but also affect other markets, interest rates, the determination of apparent market-oriented interest rate pass-through effect, which affect the most obvious is the interbank market and bank deposit market. Because the bond market development, resulting from large capital requirements, will first impact on the interbank market and bank deposit market, the result must, in the Treasury bond market development and market-oriented interest rate under the influence of the interbank market interest rates market-based mechanisms more perfect, bank deposit market will be gradual easing of interest rate controls.
2 and improve China's bond market and measures proposed
Improvement of the bond market, improve bond market liquidity and promoting market-oriented interest rate is to give full play to China's monetary policy effects of the necessary conditions. At present, China's bond market should improve the following aspects.
1, improve the mechanism for issuing bonds
(1) to further standardize the mechanism for issuing rolling. To expand the scope of the benchmark bond maturity period, and further improve the rolling release mechanism so that the primary market issuance of treasury bonds to form a more sustained release rate curve, but also to make a market bid price for Treasury bonds to better play on the pricing and valuation of the reference.
(2) try to launch a pre-release mechanisms for government bonds. For the establishment of bond prices reveal the pre-release mechanism, regulate the distribution of a bond market behavior, learning from international practice of pre-release mature bond markets in China, Treasury bond market to attempt a pre-release operation.
2, optimizing the structure of debt maturity structure and the holder
Holders of debt maturity structure and optimize the structure, enhancing the liquidity of the bond market, improve the regulatory functions of the bond market.
(1) The rational design of the term structure of treasury bonds. The formation of the term structure of bonds is often a complex and ever-changing process. The Government must take into account its own debts and should be the main demands and aspirations of these two areas, taking into account macroeconomic conditions and factors such as liquidity, the maturity structure of government bonds to make a choice.
(2) optimize the structure of bond holders. Structure of a single bond holder is China's bond market, a major chronic illness. This has to a large extent, has hampered China's bond market specifications and development. In view of this situation, make the following proposals: First, the size of the central bank holdings of government bonds to increase, with the use of monetary policy to improve the conduction effect of open market operations. Second, the abolition of commercial banks to buy government bonds to certain restrictions, to bond the structure of commercial banks to become an important component. Third, the promotion of the existing institutions such as pension funds and to nurture the development of bond investment funds. This will effectively improve the bond market participation, promoting bond market issuance and upgrading efficiency. Fourth, to allow foreign investors to buy a certain percentage of government bonds. This is conducive to the implementation of China's utilization of foreign investment policy, and it helps regulate the structure of bond holders.
3, great efforts to cultivate institutional investors in
At present the main market trading is still relatively simple, and now the inter-bank bond market trading has increased to more than 900 while the main body, it is still mainly financial institutions, non-financial institutions are now entering the market is still limited, thus limiting the coverage of this market . In China, commercial banks, bond market at present is the main investors. Should vigorously develop the non-financial institutional investors into the bond market, particularly in the bond investment funds, due to bond investment funds have the advantage of professional investment and economies of scale, and their investment style is more robust, is conducive to the healthy and stable development of the bond market. Reposted elsewhere in the paper for free download http://eng.hi138.com
4, the development of bond investment fund
Bond funds have closed and open two basic forms, with the average compared to securities investment funds, investment in bonds and the national credit fund is a combination of non-state forms of credit, the state credit is the prerequisite and basis for its existence, Treasury Fund The vast majority of funds are invested in government bonds, with other types of investment funds than bond investment funds have a reputation of high, risk, return and stability characteristics.
5, vigorously develop the bond market intermediaries
(1) expanding the scope of a dealer, improve the market-maker system, an active bond market. First, the expansion of the scope of a dealer. Central Bank of China shall be subject to strict requirements to actively create conditions for further expansion of the members of a dealer as soon as possible so that a number of results is good, securities companies with high reputation and trust investment companies to join a dealer ranks. Second, improve the market-maker system, to expand the ranks of market makers. Although China's market-maker system has been established, but because of system is imperfect, resulting in too few quotes Quan Zhong, many bonds can not be timely quote or no quotes, price information is difficult to detect and disclosure.
(2) to develop the bond market brokers. Governments in some countries to improve bond market liquidity, attaches great importance to broker business. As a transaction broker to provide intermediary services organizations, is an important medium to connect traders, brokers involved in the transaction itself, but will be market transactions for effective configuration, providing a price discovery mechanism, and improve transaction success rates. With the continuous development of China's bond market and market participants increases, direct trading is not conducive to improving market efficiency. At present, China is only one broker with the industry, the lack of competition and efficiency. Therefore, in cultivating a large number of active brokers on the development of China's OTC bond market will become more necessary.
6, to establish a unified, standardized, sub-national debt market system-level
(1) a competitive, orderly, unified, and efficient bond market, the central bank's open market policy, the role of the interest rate transmission mechanism prerequisite for the construction of the bond market, the current should concentrate on the establishment of inter-bank bond market as the core market. To continue to improve the inter-bank bond market to expand to absorb all kinds of financial institutional investors to enter, as a wholesale bond market.
(2) The flow of China's current bond market is divided state, the inter-bank bond market, bond market and the exchange of their existence. Bond market, both between the two sub-markets to operate independently communicate with each other again. But the market trading is continuous, artificially divided into different subjects of different trading markets, is not conducive to expansion of market scale, improve the market mechanism. And the price difference between the two markets is not conducive to the management there is a better grasp of the macroeconomic situation. Therefore, we should gradually unify the two markets to facilitate transactions in government bonds within the broader context. Sound bond trading infrastructure, to build a unified national debt Depository Trust & Clearing Settlement System, is the key to a unified flow of the market.
7, and actively develop bond futures market
At present China's bond market is not derivative financial instruments, under the existing trading system and trading instruments, investors can not effectively address the enormous risks of interest rate volatility, making it difficult for institutional investors, hedge and hedging operations, which hinders its right further participation in the bond market. Chase investors sell into the market is not conducive to the bond market's stability. The development of bond futures and other derivative financial instruments, risk-averse investors can be an effective means to promote market price discovery, a great deal for long-term bond investments of commercial banks, insurance companies, credit unions, funds and other institutional investors, the importance of .
 Jing Xue-cheng, Shen Bing-xi: China's interest rate marketization process [M]. China Financial and Economic Publishing House, 1999.
 (U.S.) Mishkin: Monetary and Financial Science [M]. The Chinese People's University Press, 1998. Reposted elsewhere in the paper for free download http://eng.hi138.com