What is the treasury bond repurchase market?
The treasury bond repurchase market is a market that handles treasury bond repurchase transactions. It is a bond trading market that combines spot buying and selling with forward trading. The broad repo market includes both positive repo transactions, in which traders sell certain government bonds at the same time. Here I would like to share with you some information about the treasury bond repurchase market for your reference.
What is the Treasury Bond Repurchase Market
The Treasury Bond Repurchase Market is a place where Treasury bond holders can conveniently obtain low-cost financing, a safe place for short-term capital investment, and a central bank. A place where open market operations and monetary policy are implemented, Treasury bond repurchases also increase the liquidity of Treasury bonds.
The development history of my country’s treasury bond repurchase market
Treasury bond repurchase first appeared in the United States in the 1960s as a financial innovation tool for short-term financing. After 40 years of progress, the scale of the government bond repurchase market has continued to expand, and the market system has become increasingly perfect. It now has three major functions: short-term financing, forming market benchmark interest rates, and transmitting monetary policy, and has become the most representative money market in the United States. my country's treasury bond repurchase business began in 1991. At that time, the Shanghai Stock Exchange and the National Securities Trading Automated Quotation System (STAQ system) had just been established, and cross-regional, organized and standardized treasury bond trading had just begun. Prior to this, the problem of "difficulty in issuing national debt" was already very prominent. In order to improve the liquidity of treasury bonds, after a period of preparation, the STAQ system announced a trial treasury bond repurchase transaction in July 1991. On September 14 of that year, the first repurchase transaction was completed between two member companies of the STAQ system. Driven by the repurchase transactions of the STAQ system, the sluggish situation of treasury bond trading in the organized market has gradually been reversed.
Following the STAQ system, in 1992, the Wuhan Securities Exchange also launched a treasury bond repurchase business. Since then, with the expansion of the issuance scale of treasury bonds, the launch of pilot treasury bond futures and the increasingly active treasury bond spot market, the treasury bond repurchase business has made considerable progress. At that time, my country's other major securities exchanges, including the Shanghai Stock Exchange, Shenzhen Stock Exchange, Tianjin Securities Exchange, etc., all launched treasury bond repurchase business. In the process of development, the scope of subject matter used for repurchase has also expanded, which includes not only treasury bonds, but also financial institution bonds and fund certificates listed on various securities trading centers. In short, although my country's treasury bond repurchase market only has a history of more than ten years, it has developed very rapidly.
Problems existing in my country's treasury bond repurchase market
Because my country's treasury bond repurchase market started late and the repo market system is not well developed, while the repo market is developing rapidly, it is also There are many problems, mainly reflected in the following aspects:
1. Market segmentation is serious.
Currently, there are three independent treasury bond repurchase market systems in our country, each with distinctive custody systems, trading systems and clearing systems. The fragmentation of the repurchase trading market will inevitably cause the following problems. First, it increases transaction costs, violates the efficiency principle of the market economy, and is not conducive to the effective allocation of resources nationwide. Second, it intensifies the volatility of market interest rates and encourages market speculation. Different repurchase markets produce different repo market interest rates, which can easily cause some trading entities to use interest rate differences to engage in arbitrage speculation between different markets. In the case of insufficient market scale, this kind of speculation will inevitably cause fluctuations in market interest rates, which is not conducive to the formation of benchmark interest rates and market stability.
2. The benchmark interest rate of the bond market cannot be formed.
The benchmark interest rate refers to the interest rate that is used as a reference for the prices of all financial products in the financial market. It is a generally accepted interest rate with reference value that is recognized in the capital market. As a benchmark interest rate, it has three characteristics: first, marketability, the level of interest rates is determined by the supply and demand of market funds; second, relative stability, the benchmark interest rate, as a reference standard for other interest rates, must remain relatively stable, otherwise it will cause The chaos of the interest rate system cannot correctly guide the flow of funds and promote the effective allocation of social resources; third, it has universal reference significance. The trend of this interest rate can effectively affect the trend of other interest rates and become the basis and standard for the trends of other interest rates.
In Western financial markets, because the government bond repurchase rate can timely reflect the supply and demand of short-term funds in the market, it has always been the benchmark interest rate in the money market. Although my country's current treasury bond repurchase rate is highly marketable, its stability and general reference significance are poor. Because first, the three markets have different trading entities. The trading entities in the inter-bank repo market are my country's commercial banks, while the trading entities in the exchange's repurchase market are non-bank financial institutions such as securities companies and trust investment companies. The three markets have different interest rate formation mechanisms. The interest rates are quite different and lack certain correlation. Second, the market interest rate structure is imbalanced, and jump fluctuations in interest rates caused by non-economic variables have a negative impact on the market-oriented construction of interest rates in the government bond repurchase market. Third, the lack of participation by large enterprises and individuals makes the repo market a place for short-term financing by financial institutions, rather than reflecting the changes in the supply and demand relationship of funds in the entire society.
3. The market size is insufficient.
Although my country's repurchase market has made great progress after more than ten years of development, the market size is still small. This is mainly reflected in the following: First, my country's treasury bond issuance is too small. The insufficient scale of treasury bond issuance directly limits the development and growth of the treasury bond repurchase market. Second, from the perspective of domestic market structure, the treasury bond repurchase market is dominated by the Shanghai Exchange. Although the trading entities of the inter-bank repurchase market include all commercial banks in my country, the scale of transactions continues to shrink. Therefore, insufficient issuance in the primary market of treasury bonds and inactive transactions in the repurchase market have become important factors restricting the development of my country's treasury bond repurchase market.
4. The financing function is prominent and the function of transmitting monetary policy is weakened.
Among the three major monetary policy tools in the West, open market operations are the most commonly used. The effective implementation of open market operations relies on the development and improvement of its treasury bond market. In recent years, Western countries have generally implemented open market operations through the treasury bond repurchase market. It can not only promptly regulate changes in treasury bond benchmark interest rates and guide the flow of short-term funds, but also has the advantages of short time lag and strong announcement effect. However, the development of my country's government bond repurchase market is still at the primary short-term financing stage, and its function of transmitting monetary policy is weak. Of course, the weak function of the repo market in transmitting monetary policy is closely related to the imperfect government bond market system and the need for further deepening of the commercial banking system. Therefore, how to improve and strengthen the function of the national debt repurchase market in transmitting monetary policy through market-oriented reforms has become an important issue facing the financial community today.