Abstract:
Repo is an important trading tool of financial institutions, which facilitates both the flow of cash and securities around the financial system. It has a strong linkage with the market of lending, cash bond and derivatives, and is also one of the main tools of monetary policy operations of central banks. As an critical component of China's interbank market, repo plays a key role in liquidity adjustment, monetary policy transmission, interest rate liberalization and so on. Different from the international practice of transferring the ownership of the pledged property, the interbank repo in our country mainly freezes the ownership of the pledged bonds. With the development of the interbank bond market, more and more bonds are frozen by the pledged repo, which results in the phenomenon that the more liquid the bond is, the easier it is to be frozen, which restricts the liquidity of the secondary bond market. It is also not conducive to the integrity of the yield curve of treasury bonds and monetary policy transmission, affecting the price discovery and bond valuation. Moreover, the pricing mechanism of the pledged repo and outright repo is segmented, widening the spread between two types of repo rates. We should prudently promote the reform of the interbank repo market, comply with the market's independent choice, moderately adjust the structure of the repo market, and improve the existing repo system gradually in line with international standards. It is beneficial to improve the liquidity of the secondary bond market, to meet the needs of financial institutions for bond transactions, to strengthen the role of repo as a stabilizer and interest rate anchor in the money market, and to promote the opening-up and prosperous development of the inter-bank bond market.
崔嵬. 审慎推进我国银行间债券市场两类回购改革[J]. 金融研究, 2018, 456(6): 47-55.
CUI Wei. Reform of Two Types of Repo in China's Interbank Bond Market. Journal of Financial Research, 2018, 456(6): 47-55.
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