Central bank bonds are treated as special financial bonds。
Central bank notes, i. E. Central bank notes, are short-term debt certificates issued by the central bank to commercial banks for the purpose of reconciling the excess reserves of commercial banks. The term “central bank notes” is intended to highlight its short-term characteristics (the shortest three months and the longest one year, according to the issued central bank notes)。
But there is a fundamental difference between central bank notes and bonds issued by various financial market providers: bonds issued by various bond-holders are a means of raising funds for the purpose of raising funds, i. E. Increasing the availability of funds; while central bank notes issued by central banks are a monetary policy instrument of central banks to regulate the base currency, with the aim of reducing the amount of commercial bankable funds. The direct effect of commercial banks on the payment of subscriptions to central bank instruments is a reduction in the amount of funds available。
Central bank notes, i. E. Central bank notes, are short-term debt certificates issued by central banks to commercial banks, etc., for the purpose of reconciling excess reserves of commercial banks. It is issued to traders at the operating level of the open market and individuals cannot invest directly. In 2007, there were 52 central bank dealers, with the exception of china gold, three securities companies, four insurance companies and two foundations, all of which were commercial banks. In general, the central bank issues staggered notes for the march, june, one-year and three-year periods, based on market conditions, using either an interest rate tender or a price tender, which are based on short-term varieties within one year。
Understanding central bank notes requires first understanding of open market operations. Open market operations are activities by which the central bank invests or removes reserves to the financial system, using the method of buying and selling marketable securities on the open market, to regulate credit size, money supply and interest rates in order to achieve its financial control and regulation. In most developed countries, open-market operations are the main monetary policy instrument for central banks to swallow basic currencies and regulate market liquidity. In my country, the people's bank has been an important instrument in the day-to-day operation of monetary policy since 1999. Central bank notes are one of the main instruments for the operation of our open market, which appeared in 2002. Until then, the national debt and financial debt were the main operators. The issuance of a central bank document is an act of selling securities to the market, returning to the base currency; the central bank document matures and reflects the release of the underlying currency. In general, central bank notes can be traded on the inter-bank bond market when issued, through cash-card transactions and buy-backs. The cash-off transactions are divided into the purchase of cash-in-cash securities for the central bank directly from the secondary market and the sale of cash-in-cash securities, which are placed in the base currency on a one-time basis, and the sale of market-in securities by the central bank on a one-time basis. Repurchase transactions are divided into positive and reverse purchases: repurchases are transactions in which central banks sell marketable securities to first-class traders and agree to buy them back at a specified date in the future; reverse repurchases are going in the opposite direction. Shortfalls and positive buy-backs are operations by which central banks recover liquidity from the market, but they are all affected by the actual holdings of central banks。
Central bank notes, which are used primarily to assume the function of short-term government bonds, play a significant role in regulating the supply of money, regulating the level of commercial bank liquidity, ironing currency market fluctuations and leading interest rate movements. First, central bank instruments assume the function of regulating the supply of money. For example, the rapid increase in foreign exchange reserves, influenced by factors such as the expected appreciation of the renminbi, has resulted in a significant increase in our foreign exchange share. In order to reduce the negative impact of increased foreign exchange earnings on the growth of the supply of the base currency, central banks issued large volumes of central bank notes to perform their elimination function. Second, central bank notes can regulate commercial bank liquidity levels and prevent excessive credit growth. At present, in open market operations, central bank paper subscriptions are made by commercial banks, and targeted central bank notes are mainly directed at banks that are well-funded, especially when lending is growing too fast. For example, on 9 march this year nine commercial banks were issued with a targeted bill of $10. 1 billion for a period of three years. Third, central bank notes can be used to iron off currency market fluctuations. As our participation in globalization deepens, speculative capital investment in markets such as domestic real estate will affect the domestic economy, and the resulting economic volatility will require flexible monetary policy instruments to regulate it. Thus, future monetary policy will be dominated by open markets in which central bank notes play an important role. Finally, central bank notes help to form market-based interest rates. Central bank instruments, because of their flexibility and initiative, become the “winding point” for currency markets, leading inter-bank, exchange and related bond markets to market interest rates and yield curves of corresponding durations, with a first-level market rate of return gradually becoming the price-fixing benchmark for interest rates. Of course, to be fully functional, central bank instruments must also be properly combined with other monetary policy instruments, such as deposit reserves。
Issuance and circulation of central bank notes
Central bank bills are issued by the people's bank of china in the inter-bank market through the bank of china bond issuance system. They are issued to traders at the operating level of the open market, which currently has 43 dealers at the operating level, all of whom are commercial banks. Central bank bills are issued in a discount form by way of price tenders, and 19 of the 34 issues of central bank instruments issued, in addition to competitive tenders, are distributed to nine bilateral bidders, including the bank of commerce and industry of china, the bank of agriculture of china, the bank of china and the bank of construction of china. Since central bank paper issuance is not distributed, other investors can only invest in secondary markets。
The role of central bank notes
1. Enriching open market operating tools to compensate for shortfalls in open market operating vouchers
With the introduction of central bank instruments, central banks can use them or buy them back and their combinations for "balance control, two-way operation" and rolling operations of central bank instruments, increasing the flexibility and targeting of open market operations and enhancing the effectiveness of monetary policy。
2. Providing a base rate for the market
Short-term sovereign debt yields are generally used internationally as the benchmark interest rate for the country. In our case, however, the majority of the national debt issued by the ministry of finance is over three years old, with very little stock on the short-term national debt market. In the absence of a rolling system of short-term treasury debt issued by the ministry of finance, the issuance of instruments by the central bank, while addressing the inadequacy of open-market operational tools, could improve the market interest rate structure by setting the time limit。
3. Promoting monetary markets
At present, there are few instruments in our currency markets and, owing to the lack of short-term money market instruments, a large number of institutional investors have to pursue long-term bonds, creating long-term interest rate risks in the bond markets. The issuance of central bank notes will change the current state of the currency market, which is largely short-term, and provide an important tool for institutional investors to be flexible in their positions and to ease short-term financial pressures。
