INTEREST RATES DECLINED SLOWLY AND BOND TRADING RECOVERED SLIGHTLY
There were 21 trading days in November 2002. The interbank market traded 6,845 deals with a turnover of RMB 1.079 trillion yuan. The average daily turnover was RMB 51.37 billion yuan, decreasing by 3.31per cent from last month. By the end of November, the total turnover of the interbank market had exceeded RMB 10 trillion yuan, which doubles that of 2001.
The interbank funding rate fluctuated significantly with small changes in turnover
There were no big changes in November as compared with October in the funding market. The average daily turnover slightly decreased by 6.42 per cent from last month. The weighted average rate only changed by 0.09 per cent. Although the rate had fluctuated for several months, the monthly weighted average rate remained quite stable. It reflected the steady situation of market supply and demand.
The turnover of overnight IBO001 increased in November. The proportion of overnight increased to 25.80 per cent of the whole funding turnover. This situation began with the central bank's continuous open market operations of repo in July. The rising repo rate cleared its price advantage over funding. Many interbank overnight position adjustments moved to the funding market, which resulted in a sharp increase of overnight lending in the market.
The repo rate experienced a fluctuating drop and daily turnover remained stable
Because of weakening open market operations in November, fund surplus pulled down the market rate. The daily weighted average repo rate fluctuated downwards, and the weighted average rate of the month decreased by 0.54 per cent from last month. The daily turnover remained stable at about RMB 40 billion yuan, and the daily average turnover did not change much from last month.
Apart from the minute increase in the 4-month and the 9-month rates, all other maturities' rates decreased in November. There was no trading of 6-month and 1-year maturities during November.
Bond trading recovered and the Bond Index leveled off at the bottom
The drop in bond trading began in July. The daily average turnover fell to RMB 744 million yuan in October, down 82.25 per cent as compared with RMB 4.191 billion yuan in June. With the decline of the repo rate, bond trading recovered in November. Daily turnover increased by 78.37 per cent to RMB 1.328 billion yuan as compared with last month.
The Interbank Bond Index leveled off in November. The Government Bond Index reached a high of 1,136.13 and a low of 1,129.88, and it closed at 1,131.28. The Composite Bond Index reached a high of 1,112.38 and a low of 1,108.72, closing the month at 1,111.08. This reflected that the bond price had bottomed out with the market rate dropping in November.
Institutional funding situation
The structure of the inter-institution capital flow did not change much in November 2002. State-owned commercial banks were still the biggest net lenders, with almost the same amount of lending as last month. Urban commercial banks were the biggest net borrowers, their net borrowing increased by 11.70 per cent over last month. Investment funds were active in buying bonds in November, whose net lending increased more than ten times over last month.
(by Chen Lifeng)