Financial markets functioned smoothly in the first nine months of 2010. In September, bond issuance on the inter-bank market fell slightly and the share of long-term bond issuance edged up. Money market trading was brisk, with interest rates rising in general. Spot bond trading diminished and the inter-bank bond index declined. The yield curve of government securities moved up as a whole. The Shanghai Stock Exchange Composite Index gained marginally, and the trading turnover expanded.
1. Bond Issuance1
Bond issuance on the inter-bank bond market increased by 9.5 percent year-on-year to 3320.64 billion yuan in the first nine months of 2010, and registered 457.31 billion yuan in September, down 16.3 percent from the pervious month. As of the end of September, bonds in depository2 were 15.8 trillion yuan in total, and specifically, bonds in depository on the inter-bank bond market reached 15.3 trillion yuan, accounting for 96.8 percent of the total.
Short-term bonds accounted for the lion s share of bond issuance in the first nine months of 2010, though September saw marked rise of long-term bond issuance over the previous month.
2. Inter-bank Lending
The inter-bank lending market functioned smoothly and the trading was brisk in the first nine months of 2010, with the trading volume increasing by 47.6 percent year-on-year to 20.3 trillion yuan. In September, the trading volume reached 3.1 trillion yuan, down 10.4 percent from August. 1-day products still dominated the trading. Specifically, the trading volume of 1-day products hit 270 million yuan, accounting for 86.5 percent of the total for the month.
In September, inter-bank lending interest rates generally rose over the previous month. The weighted average interest rate of inter-bank lending stood at 1.90 percent, up 28 basis points over August. The weighted average interest rate of 7-day products rose by 56 basis points over August to 2.48.
3. Repo
The repo trading was relatively heavy in the first nine months of 2010. The turnover of bond-pledged repos grew by 22 percent year-on-year to 62.7 trillion yuan for the first nine months, and reached around 8 trillion yuan in September, down 18.1 percent over August. One-day products still dominated the trading, with their turnover registering 6.3 trillion yuan, and accounting for 78.5 percent of the total turnover of bond-pledged repos for the month.
In September, the weighted average repo rates on the inter-bank bond market climbed up over August. The weighted average interest rate of bond-pledged repos stood at 1.98 percent, up 32 basis points from August. The weighted average interest rate of 1-day bond-pledged repos registered 1.78 percent, up 20 basis points from August.
4. Spot Bond Trading
In the first nine months of 2010, spot trading on the bond market was on the rise, with the turnover on the inter-bank bond market reaching 44.7 trillion yuan, up 22.5 percent year-on-year. The turnover on the inter-bank bond market registered 6.5 trillion yuan in September, down 12 percent over August. The spot bond trading turnover in the exchanges registered 11.84 billion yuan, up 6.5 percent over August.
In September, the inter-bank bond index fell moderately, while the exchange government securities index rose slightly. The inter-bank bond index closed at 135.78, down 0.23 point or 0.2 percent over the previous month. The exchange government securities index gained 0.06 points or 0.1 percent over the previous month to 126.68.
5. Stock Trading
In September, the Shanghai Stock Exchange Composite Index rallied moderately to close at 2655.7, up 16.9 points or 0.6 percent. The average daily turnover on the Shanghai Stock Exchange reached 124.86 billion yuan, up 10.87 billion yuan over the previous month.
(Sources: China Foreign Exchange Trading System, China Government Securities Depository, Trust and Clearing Co., Ltd, and Shanghai Stock Exchange)
1 Bond issuance refers to RMB bonds issued on the inter-bank market (excluding central bank bills and corporate bonds).
2 Excluding central bank bills in depository, but including corporate bonds in depository.
