The People’s Bank of China (PBOC) undertook 5 billion yuan in central bank bill swaps (CBS) on 30 July, with a tenor of three months and a fee rate of 0.10%.
The CBS operation was an open market operation with bidding amongst primary dealers, with winning bidders including big state-owned banks, joint stock banks, municipal commercial banks, rural commercial banks and securities firms.
PBOC said that the purpose of the operation was to “raise the liquidity of the market for bank perpetual bonds, support the issuance of perpetual bonds by banks to supplement capital, and strengthen the ability of finance to service the real economy.”
PBOC first approved the issuance of perpetual bonds by Chinese banks at the start of 2019, in order give lenders an additional channel for capital supplementation purposes.
PBOC simultaneously announced the launch of central bank bill swaps (CBS), with the goal of bolstering the liquidity of perpetual bonds, as well as the acceptance of bank perpetual bonds with ratings of no lower than “AA” as qualified collateral for medium term lending facilities (MLF), targeted medium term lending facilities (TMLF) and standard lending facilities (SLF).