TURNOVER INCREASED SLIGHTLY WHILE THE MARKET RATE FELL

There were 18 trading days in October 2002. The National Interbank Funding Center processed 5,816 transactions with a total turnover of RMB 956.28 billion yuan. The average daily turnover was RMB 53.13 billion yuan, up 10.44 per cent over last month. Repo rate remained at its high level, and the turnover of bond transactions continued to plummet by 36.69 per cent as compared with last month.

The turnover in the lending market dropped and that of overnight increased significantly

Because of the IPO of China Unicom, the turnover in the lending market increased sharply and the daily weighted rate rose remarkably in September. After the trading returned to a normal level, the daily average turnover fell by 34.87 per cent in October. The lending market rate also fluctuated downward.

Following the sharp rise in August and September, the turnover of overnight lending continued to rapidly rise by 10.62 per cent as compared with last month. The proportion of overnight increased to 22.14 per cent in the total lending turnover. The turnover of 7-day that used to account for the largest proportion shrank by 41.06 per cent this month. Influenced by the open market operation of the PBC, the turnover of 90-day and 120-day increased dramatically.

The repo rate decreased remarkably and the daily average turnover gradually increased

Under the influence of open market operations in the past few months, the repo rate went up sharply, while its turnover fell gradually. At the end of September, the daily weighted repo rate reached 2.318. With supply exceeding demand in the interbank market, and weakening open market operations in October, the repo rate gradually fell to 2.240 at the end of October, and the daily average turnover recovered to about RMB 50 billion yuan.

The average daily turnover of 7-day repo increased considerably by 59.54 per cent over last month, accounting for 88.90 per cent of all repos. The turnover of medium and long-term products that had increased sharply during the third quarter, declined in October. The turnover of 6-month decreased by 92.57 per cent.

Turnover in the bond market continued to decrease and the YTM slowly went down

The decline in bond trading began from July and did not show any tendency towards its slowing. The daily average turnover plummeted by 36.69 per cent as compared with last month. The monthly turnover reached RMB 13.40 billion yuan, equal to the sum of several days' turnover in June. And the daily average turnover of treasury bonds in the Shanghai Securities Exchange amounted to RMB 2 billion yuan for the same period. The liquidity problem in the interbank bond market was very serious.

The turnover of 020012, 020210,020004, 020212 and 020302 ranked top five in October. These bonds were all issued in the second half of this year with short maturities. Therefore, their decline was limited even when the YTM rose sharply.

Institutional funding situation

The structure of institutional financing did not change in October. State-owned commercial banks were still the biggest net lenders and their lending increased by 23.14 per cent as compared with last month. In comparison with last month, the borrowing of urban commercial banks increased by 53.81 per cent. Insurance companies were sluggish this month, their borrowing and lending decreased by 21.88 per cent and 46.54 per cent respectively. Investment funds became net lenders in October, due to their active purchase of bonds.

(by Chen Lifeng)