PBOC Con­ducts 8th Cen­tral Bank Bill Swaps Op­er­a­tion on 27 August

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 to 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).

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