The People’s Bank of China (PBOC) announced on the morning of 27 August that it would conduct a 5 billion yuan central bank bill swap (CBS) operation, with a tenor of three months and a coupon rate of 2.35%.
PBOC said that this eighth central bank bill swap operation was for the purpose of “raising the market liquidity of bank perpetual bonds, and supporting the issuance of perpetual debt by commercial lenders to supplement their capital levels.”
The CBS operation was conducted via fixed fee rate bidding on the open market with primary dealers, and the fee rate was set at 0.10%.
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 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).