PBOC Undertakes 5th Central Bank Bill Swap since Start of 2020

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The Chinese central bank has launched its fifth central bank bill swap (CBS) in 2020 in order to shore up the liquidity of commercial bank perpetual bonds.

On Tuesday 28 May the People’s Bank of China (PBOC) undertook a CBS operation valued at 5 billion yuan (approx. USD$710 million).

The CBS were open to primary dealers for bidding at a fixed rate of 0.1%, and the swaps are due on 26 August 2020.

On the same date PBOC injected 10 billion yuan into the Chinese banking system via seven-day reverse repos with an interest rate of 2.2%.

PBOC launched both perpetual bonds and CBS in January 2019, in a bid to shore up the capital levels of Chinese banks.

Chinese banks are allowed to issue perpetual bonds to improve their capital standing, while CBS facilitate issuance by making the instruments more liquid.

On the evening of 24 Jan­u­ary 2019 PBOC an­nounced its de­ci­sion to launch CBS in or­der to “raise the liq­uid­ity of bank per­pet­ual bonds (in­clud­ing non-fixed term cap­i­tal bonds) and sup­port the is­suance of per­pet­ual bonds to sup­ple­ment cap­i­tal by banks.”

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