China's Short-Term T-Bonds Yield Drops After Finance Ministry Intervenes to Buoy Market Makers
Yicai Global
/SOURCE : Yicai
China's Short-Term T-Bonds Yield Drops After Finance Ministry Intervenes to Buoy Market Makers

(Yicai Global) June 21 -- Yields on short-term Chinese treasury bonds slumped following the first intervention by the finance ministry in support of market makers.

The ministry intervened in the T-bond market yesterday in an unprecedented move to back market makers by buying CNY1.2 billion worth of 2017 one-year interest-bearing (9th phase) T-bonds, with the winning yield fixed at 3.4901 percent.

The move led to a slump in long-term T-bond yields on Monday, followed by a plunge in short-term treasury bond yields yesterday, with the one-year T-bond yield dropping 3.07 basis points to 3.5588 percent.

China Foreign Exchange Trade System announced the market-making operation on Monday, noting that it aims to raise liquidity on the secondary T-bond market and to align the bond yield curve with actual supply and demand, CFETS said in a notice on its website.

The finance ministry can support T-bond market makers by either buying or selling bonds on the secondary market, per a document that the ministry and PBOC issued last September. Monday's event marked the first T-bond buy carried out ever since the promulgation of the document.

Yesterday, yields on long-term treasury bonds remained largely unchanged after the strong rally on the previous day. During the rally, 10-year dominant contract T1709s and five-year dominant contract TF1709s soared 0.59 percent and 0.37 percent, respectively.

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Keywords: Bond Market , Finance Ministry , Market Maker , Intervention , Interest Rate