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.”