The introduction of bond forward trading has won wide attention in the market, which is of positive significance to deepening the reform of bond market, promoting the establishment of risk management mechanism and interest rate marketization, and market participants have fully affirmed it.
After the introduction of this trading method, as of the end of September, 60 bond forward transactions have been completed, with an amount of 8.734 billion yuan, which is relatively light. This shows that under the current financial market situation, domestic institutions are still unable to obtain opportunities for speculation, hedging or arbitrage through forward trading. Although the basic tools of western mature markets will be gradually introduced to China, the market performance shows that "imported products" still face a long running-in and selection process in China, so it is necessary to re-examine the behavior mode and trading mode of financial markets under the western thinking mode.
I. Comparison of financial instruments in the bond market
The US bond market mainly includes pre-issuance, repurchase and reverse repurchase, options and futures, principal and interest stripping tools and other financial instruments. The activity of these tools is helpful to improve market liquidity and reduce the financing cost of issuers. For example, the active pre-issuance transaction before bond issuance can measure the market demand in advance, which is convenient for issuers and underwriters to price bonds; Repurchase and reverse repurchase transactions help to improve market liquidity and help trading institutions achieve short-term financing; The futures and options market of bonds is conducive to market participants to establish decentralized hedging strategies in the liquidity market; The zero-coupon debt generated by the principal and interest stripping tool is helpful to realize cash flow reorganization and meet the needs of different investment groups for different cash flow structures.
In recent years, some financial instruments have been gradually introduced into the domestic bond market by studying the operation of western mature markets, and now they have been extended to repurchase and reverse repurchase transactions, principal and interest stripping tools, forward bonds, forward transactions and upcoming pre-issuance transactions. In terms of market performance, pledged repo and reverse repo have existed for the longest time, and have become the basic means for banks and other financial institutions to regulate liquidity and manage positions, ranking first among all kinds of transactions in the inter-bank bond market, with a transaction volume of nearly 10 trillion yuan in 2004. Buyout repo is similar to pledged repo, which can provide financing channels for market participants. Due to the limited number of basic bonds in the domestic bond market and the lack of continuous auction system, the transaction volume in 2004 was only more than 654.38+020 billion yuan. Due to the lack of liquidity in the domestic market, the principal and interest stripping tool developed by the issuer can not meet the effective needs of market participants, and the transactions are scarce. The China Development Bank has only tentatively operated it once. Forward bonds are mainly used to solve the seasonal fluctuation of domestic capital supply and interest rates. This arrangement was first put into use when the Ministry of Finance issued treasury bonds. At present, the market funds are relatively loose, and the People's Bank of China uses this system in the issuance of central bank bills to smooth the impact of open market operations on the capital market. The forthcoming bond pre-issuance system will help to establish a price discovery mechanism, shorten the issuance cycle in the underwriting process and reduce the underwriter's capital occupation.
Second, forward trading means and domestic development status
Forward trading is a financial derivative tool widely used in the financial market to avoid interest rate risk. The fundamental difference with spot trading is that it delays the delivery time of the target. Broad financial forward contracts include forward interest rate agreements, futures, swaps and options. In the domestic bond market, forward trading includes forward bonds, forward trading in the secondary market and the upcoming pre-issuance system in a big concept. However, due to the factors of supervision and market environment at that time, the futures trading of government bonds has not resumed since it was stopped by the regulatory authorities.
According to the different trading methods and places, forward financial contracts can be divided into two ways: on-site centralized trading and off-site trading. Among them, futures and options have been institutionalized and standardized, and they are usually listed on futures exchanges and options exchanges respectively according to centralized bidding. Forward interest rate agreements and swaps are usually over-the-counter transactions, which are basically outside the scope of futures trading laws in western markets. In the United States, the over-the-counter trading system of bond forward trading originated from the CommodityExchangeAct of 1974, which allows treasury forward trading outside the scope of futures trading. However, the institutionalization of Japanese bond forward trading began after the Securities Association of Japan implemented the regulations on bond forward trading in 1992. In terms of market construction, domestic forward transactions are basically in line with international standards, and the inter-bank market forward transactions are supervised by the People's Bank of China and are part of over-the-counter transactions.
In the mature western bond market, forward trading exists as a necessary and normal trading mechanism. Generally speaking, the most important economic benefit of forward trading lies in providing hedging means for market participants and increasing the flexibility of trading opportunities; Market authorities and internal control departments are most concerned about whether the speculative atmosphere of short selling in the market is too strong, and whether it will increase the market risk caused by price fluctuation and the credit risk caused by default delivery with the extension of delivery period. From the experience of foreign countries, in order to effectively avoid their own trading risks, both parties will carefully choose their trading partners and re-examine the credit line between institutions on a regular basis. Therefore, the control of transaction risk will inevitably lead to a higher market concentration of forward transactions, and trading agents will also be concentrated in the hands of several large institutions.
The introduction of bond forward trading has won wide attention in the market, which is of positive significance to deepening the reform of bond market, promoting the establishment of risk management mechanism and interest rate marketization, and market participants have fully affirmed it.
After the introduction of this trading method, as of the end of September, 60 bond forward transactions have been completed, with an amount of 8.734 billion yuan, which is relatively light. This shows that under the current financial market situation, domestic institutions are still unable to obtain opportunities for speculation, hedging or arbitrage through forward trading. Although the basic tools of western mature markets will be gradually introduced to China, the market performance shows that "imported products" still face a long running-in and selection process in China, so it is necessary to re-examine the behavior mode and trading mode of financial markets under the western thinking mode.
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