Transaction Summary

In the first half of 2002, the interbank market performed 36,045 trade deals with a total turnover of 5,097.718 billion, an increased of 145.26 per cent when compared with the same period last year, and has exceeded the yearly turnover of 2001. The market rate continued to fall because of excess of supply over demand, and the rate cut in February. Spot bonds set new records in 2002, and the turnover increased 12 times more than the same period last year.

Interbank weighted interest rate went down and varieties centralized on short term

The interbank borrowing market performed 2,293 trade deals with a turnover of 483.03 billion yuan in the first half of 2002, an increase of 12.88 per cent when compared with the same period last year. Because of excess of supply over demand, the weighted interest rate continued to fall from 2.411 per cent in January to 2.035 per cent in June.

The varieties focused on short term more than last year. The proportion of overnight and 7-day turnover increased 9.53 and 31.34 percent respectively when compared with the same period last year. Meanwhile, others maturities decreased. Overnight, 7-day and 20-day turnover added up to 96.39 per cent of the whole market, which increased by 5.69 per cent over the same period last year.

Repo market performed actively while the rate remained stable

The repo market recorded 29,891 trade deals with a turnover of 4.362 trillion in the first half of 2002, which is a dramatic increased of 167.63 per cent when compared with the same period last year. Differing from the interbank borrowing market, the repo market rate remained stable. The daily weighted average rate gradually fell from 2.100 to 1.950. The daily turnover was also relatively stable. In the second quarter, the daily turnover remained at high level.

Compared with the interbank funding market, the degree of focusing on short-term maturity in the repo market was more distinct. The proportion of 7-day maturity instruments occupied nearly 84.49 per cent of the total turnover. The sum of the volume of maturities within 21 days added up to 96.77 per cent of the total volume.

Further progress in bond trading

The turnover of the bond trading soared by 1,116.46 per cent over the same period last year. The daily turnover continually set new records of 6.27, 7.2 and 8.36 billion respectively in April, May and June. Pushed by the surplus fund, the yield to maturity (YTM) continued to fall in the first half of 2002 and the price increased quickly. The YTM reached the peak of 3.569 on January 18, and fell to the bottom of 2.149 on June 18, down 142 bps. The Interbank Government Bond Index and Composite Bond Index rose from 1,091.83 and 1,075.90 to 1,137.43 and 1,120.03 respectively.

Institutional funding situation

The structure of the inter-institution capital flow was changed in the first half of 2002. Insurance companies, rural credit cooperatives and other commercial banks became the net demanders while in the same period last year they were the net suppliers. The supply of state-owned commercial banks increased by 193.97 per cent over the same period last year. State-owned commercial banks were the only net suppliers among all financial institutions.

Regional funding situation

The most active trading regions in the first half of 2002 were Beijing, Shanghai and Guangzhou. Beijing was the only net supplier region. Guangzhou was the biggest demand region with a demand increase of 1,709.30 per cent when compared with the same period last year. Shanghai changed from net supplier in 2001 to net demander in 2002. The trading in Wuhan and Xi'an areas increased by 125.25 per cent and 118.19 per cent over the same period last year. This reflects that funding trade in these two areas became more and more active this year.

(by Chen Lifeng)