For a long time, an important constraint restricting the development of the RMB fixed income market has been the lack of a benchmark interest rate system, which makes it impossible to form a reliable and tradable (Reliable and Tradable) RMB yield curve. Repo rate, Shibor (Shanghai Interbank Offered Rate), central bank bill yield, treasury bond yield, and fixed deposit interest rate all more or less serve as benchmark interest rates, thus making the money market, bond market, and derivatives The product markets are segmented from each other, and the market depth and breadth are insufficient. Since investors cannot freely trade and arbitrage, the financial market cannot achieve arbitrage-free equilibrium.

In response to this problem, the People's Bank of China has been working hard to cultivate a RMB benchmark interest rate system. There is a gradual understanding process for the monetary authorities in selecting the RMB benchmark interest rate. Since 2007, the People's Bank of China has promoted Shibor as the RMB benchmark interest rate and vigorously promoted the development of Shibor-based bonds, IRS (interest rate swaps) and FRA (forward interest rate agreements).

However, RMB Shibor is an interest rate model designed after the US dollar Libor (London Interbank Offered Rate), which has inherent shortcomings.

First of all, there are inherent deficiencies in its institutional design. Shibor is based on quote-driven rather than transaction-driven, and the quoter does not bear transaction obligations, which cannot fundamentally eliminate the possibility of human manipulation in the quote process.

Secondly, U.S. dollar Libor is the benchmark interest rate in the offshore Eurodollar market, not the benchmark interest rate in the U.S. domestic market, but Shibor is an onshore interest rate benchmark. The benchmark interest rates in the U.S. dollar market are still the federal funds rate and U.S. Treasury yields. Participants in the Eurodollar market, as overseas institutions, cannot directly enter the federal funds market, so they can only resort to Libor as the benchmark for fund lending and repurchase. In fact, the interest rate benchmark for U.S. dollar bonds issued in the United States is generally based on Treasury yields, while Eurodollar bonds are based on Libor. From this perspective, using onshore Shanghai to imitate offshore London to cultivate Shibor is completely contrary to the original intention of designing the benchmark interest rate system.

Since this year, the People's Bank of China has used more open market forward and reverse repurchase operations to regulate the money market, reflecting that the monetary authorities attach greater importance to the guidance of repo interest rates.

China’s interest rate marketization process continues to accelerate. Just as the Federal Reserve sets the overnight federal funds rate target, the People’s Bank of China may try to use the repo rate as an intermediary target for monetary policy through normalized forward and reverse repurchases. Open market operations maintain the repo rate at the central bank's target level. Eventually, the People's Bank of China may abandon the benchmark interest rates for deposits and loans and instead set target interest rates for money market policies.

It is conceivable that the future RMB yield curve will be a complete and continuous curve composed of the short-end repo rate, the medium- and long-term treasury bond yields, and interest rate futures based on the money market and treasury bond market. , tradable yield curve.

At the same time, with the construction of Hong Kong's offshore RMB financial center and the advancement of RMB internationalization, it is also a good idea to cultivate an offshore RMB Hibor (Hong Kong Interbank Offered Rate) market in Hong Kong. choice.