China’s central bank treasury-bond trade restart ‘now certain’ as discussions deepen between monetary, fiscal agencies
- State media article on Wednesday says it is ‘certain’ that China’s central bank will participate in treasury bond trading amid better coordination with the finance ministry
- An instruction by President Xi Jinping that was only made public in March had fuelled speculation over an aggressive easing of monetary policy
A first purchase in over 20 years of treasury bonds in the secondary market by China’s central bank is seemingly approaching, regardless of market concerns over quantitative easing, after state media on Wednesday stepped up suggestions of improved coordination by the People’s Bank of China and the finance ministry.
“As it is now certain for the central bank to participate in treasury-bond trading, the coordination of treasury-bond issuance pace and monetary policy operations will become challenging in aligning fiscal and monetary policy,” the Securities Times, a financial newspaper under the People’s Daily, wrote on its front page.
It is the first in a series of articles that the newspaper plans to run to discuss the room, mechanism and specific ways of cooperation between the PBOC and the Ministry of Finance.
On the fiscal side, it is necessary to further optimise the maturity structure and issuance pace of government bonds
“It places higher demands on the depth and price formation mechanism of the government bond market,” the Securities Times added.
