CDB Conducts the First Two-way Operations in Market-making Support

On August 10, 2020, CDB successfully completed, via the National Interbank Funding Center, its first domestic bond market-making support in two-way operations. This means that simultaneous purchase and sale can be conducted and the market-making supports two-way operations. This is another move taken by CDB to improve its market-making supporting mechanism and facilitate the supply-side structural reform of the bond market and interest rate liberalization.

This simultaneous purchase and sale operation involves four bonds whose volume totals 3.3 billion yuan, including 3 billion yuan in simultaneous sales, and the financial bonds involved are the Ninth Issue of 2011 (110209), the Fifteenth Issue of 2017 (170215) and the Fourteenth Issue of 2018 (180214). The remaining maturity is 20.5, 7.0 and 5.2 years and the reference yield rate is 3.97%, 3.43%, and 3.31% respectively. The simultaneous purchase volume comes at 300 million yuan, involving the Fifth Issue of 2020 (200205) with a remaining maturity of 9.6 years and a reference yield rate of 3.55%. Market makers take an active part in the bidding and the bond is over three times oversubscribed.

According to CDB, with the strong support and under the guidance of the People’s Bank of China, the completion of this market-making support has witnessed the 12th such operation in cooperation with the National Interbank Funding Center and China Securities Depository and Clearing Corporation Limited, handling a total amount of 28.7 billion yuan and effectively increasing the liquidity of existing bonds. Since May, 2020, CDB has increased the frequency of market-making support to twice a month, and upgraded the operation from the one-way simultaneous sale to two-way simultaneous purchase and sale, indicating that market makers can buy more active bonds to inject liquidity into the market while lessening the pressure on their inventory and risk exposure management in a timely manner. This will provide the bond market with a true and accurate CDB bond benchmark interest rate system, which is expected to help ignite market makers’ enthusiasm for CDB bonds’ quote and market making and promote the liquidity and stability of the bond market. Looking ahead, CDB will respond more actively to market demands and carry out market-making support services in an orderly and steady manner so as to gradually form an effective mechanism for the better development of the bond market.