REPORT ON THE INTERBANK LENDING & BOND SYSTEM IN Q3 2003

 

In the third quarter of 2003, with 68 business days, the interbank market recorded 20,351 deals, down 13.88% year-on-year; the turnover stood at 5.71 trillion yuan, 1.09% weaker than the previous quarter. The lending rate and repo rate increased markedly, rising 11.19% and 21.79% year-on-year respectively. In the first nine months, the national interbank market hit 60,992 deals with a value of 12.86 trillion yuan. In the last ten days in August, the market rates rallied due to the shortening fund.

 

Lending rates fluctuates at high levels with shrinking turnover

In the third quarter of 2003, the lending market concluded 2,737 deals, with a turnover of 720.05 billion yuan, a slim decline from the second quarter yet an increase of 102.20% year-on-year. The average daily turnover was still above 10 billion yuan. Influenced by the upward market rates, the daily lending volume plunged since late August. Remaining steady around 2.12% before the middle of August, the weighted lending rate advanced with each passing day since late August, hitting a record high of 3.1515% on September 28. In September, the lending rate, though slow down in the increase, presented an increasing tendency of fluctuating at higher rates. Trends in the market were still unclear.

 

Repo rate advanced; volume of single deal increased sharply

Affected by tight funding, repo rates steadily climbed. The weighted repo rate closed at 3.2797% on September 28, a rate rarely seen in recent years. Deals concluded in the repo market continued to shrink following trends seen since the second quarter, reaching 10,047 in the third quarter, a slump of 51.22% year-on-year. The turnover, however, went up by 18.27% year-on-year to 3.75 trillion yuan. Compared with the second quarter, the growth of turnover expanded in the third quarter to hit 47.54%. Repo deals fell dramatically, while the volume per deal stepped up remarkably to an average of 373 million yuan. The daily average trading volume was 55.137 billion yuan.

 

Bond market dips; pessimism prevails in the market

In the third quarter of 2003, the cash bond market boomed with 7,567 deals, a year-on-year increase of 388.5%, valued at 1244.162 billion yuan, up 12 times over the same period of last year and 73.17% over the previous quarter. The average daily volume reached 18.297 billion yuan. In late August, due to the surge in market interest rates, the bond market dipped low with shrinking daily turnover. The average daily turnover in September stood at 12.242 billion yuan, far lower than the 19.339 billion yuan in July. The yields also zoomed ahead, with the spot seven-year rate reaching a high of 3.21% at the end of September.

 

Paper market expands; quotes clearly influenced by fund situation

By September 30, www.chiancp.com.cn had 614 members, including four state- owned banks, 10 shareholding commercial banks, 90 city commercial banks, 19 urban credit cooperatives, 29 financial companies, 164 rural credit cooperatives, 284 authorized branches of commercial banks and 14 foreign funded banks.

 

In the third quarter of 2003, 109 financial institutions made 619.503 billion yuan worth of 1,186 quotes on www.chinacp.com.cn, including 392.727 billion yuan worth of 712 repo quotes by 80 institutions, and 226.776 billion yuan worth of 474 rediscount quotes among financial institutions by 73 institutions.

 

Institutional financing

In the third quarter of 2003, the structure of inter-institution funding hardly changed. The state-owned and joint stock banks remained the largest net lender, with a net funding volume of 2.5519 trillion yuan, up 21.28% year-on-year. City commercial banks were the largest net borrower, with their net borrowing volume up 57.29% year-on-year to 1.7859 trillion yuan.

 

The top net lenders were state-owned commercial banks and joint stock banks, city commercial banks and rural credit cooperatives. Rural credit cooperatives, which were not among those affected by the deposit reserves adjustments, had comparatively adequate funding and thus grabbed a considerable share in lending to the market.