REPORT ON THE INTERBANK LENDING AND BOND SYSTEM IN APRIL 2004

Turnover shrank greatly and interest rates rebounded markedl

In the 22 trading days of April 2004, the national interbank RMB market concluded 5686 deals with a trading volume of 1.069 trillion yuan. The turnovers for credit lending, bond repo and cash bond were 119.917 billion, 772.918 billion, and 176.259 billion yuan respectively. As compared with the previous month, the daily trading volume for credit lending, bond repo and cash bond drop dramatically. The average weighted interest rates for credit lending and bond repo both went up by over ten percent from the end of March.

Lending rate jumped upwards with falling turnover

In April, 779 deals of credit lending were concluded, with a turnover of 119.917 billion yuan. The average daily turnover fell by 54.22 percent year-on-year and 19.88 percent month-on-month to 5.451 billion yuan. Influenced by various factors, the weighted lending rate jumped upwards from the beginning of the month and hit a month high of 2.622 percent at the end of April, 50 bps higher than that at the beginning of the month.

The great falling of credit lending this month was due primarily to the decrease in short-term varieties. The average turnovers for overnight and seven-day lending decreased by 23.82 percent and 24.21 percent respectively. The performance of long-terms showed a sharp difference. The trading volumes for one- and two-month ballooned by 117.88 percent and 192.04 percent from the same period last year.

Repo rates went up steadily and short-terms dragged down the turnover

In April 3263 deals of bond repo were concluded with a turnover of 772.918 billion yuan. The average daily volume stood at 35.133 billion yuan, down 19.08 percent year-on-year and 5.06 percent month-on-month. T-bond and financial bond repo accounted for 92 percent of the total repo volume, including 349.3 billion yuan of T-bond repo and 367.89 billion yuan of policy financial bond repo. The repo rate went up steadily and stabilized at the end of the month. The weighted average repo rate in April had a low of 1.85 percent and a high of 2.57 percent, with a range of 72 bps.

In April performances of repo varieties varied sharply. The R001 and R007 went down by 8.04 percent and 21.71 percent in March respectively. Contrarily, the turnover of most maturities above 14 days increased considerably. Trading volume for short-terms declined markedly while that of medium- and long-terms zoomed ahead.

Bond transaction slumped and the composite index knocked down

April was a dull month for cash bond transactions. The bond market sealed 1644 deals valued at 176.259 billion yuan. The average daily volume of 8.012 billion yuan registered a year-on-year slip of 2.60 percent and a month-on-month dip of 22.71 percent. Among all the bond transactions, T-bonds amounted to 35.001 billion yuan, policy bonds 96.441 billion yuan, central bank papers 44.031 billion yuan, and CITIC bonds 786 million yuan, all registering a decrease from March to different extents. The composite bond index was knocked down to 1135 points at the end of April, losing five points from the beginning of the month.

Institutional financing witnessed decreased volume and similar structure

In April, state-owned and joint banks led the list of lenders with a total lending of 781.575 billion yuan, down 28.11 year-on-year. City commercial banks ranked second. They lent 114.317 billion yuan, slumping 40.07 percent from the same period of 2003. Other financial institutions like policy banks, insurance companies and securities companies all recorded marked negative increases in their lending to different extents.

The structure for borrowing remained almost the same. Corresponding to the shrinking lending, the volume for borrowing also went down. City commercial banks stood out as the largest borrower with volume hitting 503 billion yuan. Rural credit cooperatives followed by borrowing 217.758 billion yuan. Considering both lending and borrowing, city commercial banks and rural credit cooperatives are the top net borrowers in the market, their net borrowing 388.691 billion and 147.918 billion yuan respectively.