What Is a Treasury Money Market?

The national debt market is a collective term for the national debt issuance and circulation markets, and it is a place to buy and sell national debt. The central bank conducts open market operations by buying and selling treasury bonds on the secondary market (direct buying and selling, treasury bond repurchase, and anti-repo transactions), thereby depositing and depositing the base currency, adjusting the money supply and interest rates, and realizing fiscal and monetary policy. Organically.

Treasury market

Treasury market refers to the venue or system of Treasury trading.

Since China resumed the issuance of national debt in 1981, it has been continuously exploring and reforming the method of issuing national debt. In 1991, China's first trial of issuing government bonds by underwriting and underwriting was successful. This marks the beginning of the formation of the primary market mechanism for China's national debt. In 1993, on the basis of the underwriting and underwriting method, China introduced the first-grade government bond self-employment system, and 19 financial institutions with good reputation and strong financial strength were approved as the first batch.

The government bond market can be divided into two parts according to the level or stage of government bond transactions:

Weak regulatory function in the Treasury market

The main problem is the lack of short-term national debt in China, the irrational structure of its holders, and the lagging development of the over-the-counter market, which directly restricts the activeness of the national debt transaction, which seriously reduces the liquidity of the national debt market. Had a great impact.

First, most of China's issued government bonds are mainly medium-term government bonds. For example, since 1999,

The government bond market generally has two functions:

Insufficiency of the Treasury Market Affects the Process of Interest Rate Liberalization

From the early 1980s to the present, China's national debt market has played a huge role in raising funds, supporting key national large-scale infrastructure projects, improving the economic structure, and maintaining a moderate rate of economic development. China's implementation of a proactive fiscal policy and an important support means to manage the economic recession. However, the government bond market is lagging behind in terms of adjustment functions, price discovery functions, and interest rate risk aversion functions, which will seriously affect the process of China's interest rate marketization.

Treasury market price discovery incomplete

At present, neither the national bond issuance interest rate nor the national bond circulation yield on the secondary market has fully realized marketization.

Improve the function of the national debt market and promote the marketization of interest rates

From the perspective of interest rate liberalization, China's government bond market has not yet been able to generate market benchmark interest rates, and open market operations cannot play its due role under the marketized interest rate system. The use of government bonds and government bond derivatives to evade interest rate risk is even lacking. The market's adjustment function, price discovery function, and the function of avoiding interest rate risk need to be further improved.

Improve the price discovery function of the national debt market

First, improve the price discovery function of the national debt market, fully realize the marketization of interest rates on the national bond issuance market and the circulation market as soon as possible, establish a complete and reliable national bond yield curve, and provide a continuous market benchmark interest rate for the financial market and the central bank .

In the issuance market, bidding methods should be mainly used to introduce a competition mechanism. By issuing short-term, medium-term, and long-term government bonds on a regular, balanced, and rolling basis, the position of government bond rates as the market's benchmark interest rate can be established and continuously strengthened to promote benchmarked government bond rates. As close to the market interest rate as possible, reflect the market interest rate, and thus play a role in guiding the market interest rate. Gradually extend the initial maturity of fixed-rate government bonds to 7 years, 10 years, 20 years, and even 30 years, and finally form a complete, reliable, and more accurate curve of government bond yields, which provides changes in interest rates on other debt instruments and adjustments to central bank interest rates A reliable reference indicator will undoubtedly play a positive role in promoting the establishment of a market-based interest rate system.

We will give full play to the role of market makers of government bond underwriters and open market operations as primary dealers to improve the liquidity of the government bond spot market. Through exchanges between market participants, hedging and arbitrage activities are conducted in various markets to create market conditions that level the interest rate of the entire market. Drawing on international experience, the inter-bank bond market has gradually developed into a national debt over-the-counter (OTC) market, and the exchange bond market has developed into a national debt over-the-counter market. Eventually, a unified and open government bond issuance market and a highly liquid government bond circulation market have been formed.

Establish a unified and open government bond market. Unified means that on the basis of a unified government bond custody and clearing system, no matter which government bond market an investor trades in, it is ultimately delivered within the same system. With reference to international practices, the inter-bank bond market and the exchange bond market are unified. Treasury bonds listed and traded are centrally managed and cleared and settled at the Central Government Bonds Registration and Clearing Co., Ltd., and the exchange no longer conducts treasury bonds. Opening means that all investors can freely enter and exit the interbank bond market and exchange bond markets to buy and sell government bonds. Due to the minimum cost restrictions, individual investors and small investors can participate in transactions through agents or purchase of government bond investment funds. .

Adjusting the maturity structure and holder structure of government bonds

Second, adjust the maturity structure of the national debt and the structure of the holders, enhance the liquidity of the national debt market, and improve the regulatory function of the national debt market. In the future, it is necessary to increase the issuance of short-term government bonds with a maturity of less than one year, such as 3 months, 6 months, and 9 months, and gradually form a long-, medium-, and short-term government bond structure with a reasonable structure. Mr. Dai Yuanchen believes that China implements an annual scale approval system for the issuance of treasury bonds, which is also one of the reasons for the serious shortage of short-term treasury bonds with a term of less than one year. It is suggested that the upper limit of a short-term Treasury bill balance be determined by the Standing Committee of the National People's Congress in accordance with the requirements of open market operations. The Ministry of Finance should regulate the rolling issuance and no longer report year by year or by case.

In the future, the structure of government bond holders should be changed from individual to institutional investors to provide a sufficient carrier for the central bank's open market operations. The structure of government bond holders is tilted toward institutional investors, which will inevitably cause a considerable number of individual investors to fail to buy government bonds, and the active participation of individual investors is extremely important for the development of the government bond market. The key to solving this contradiction is to vigorously develop the national debt investment fund. Through the national debt investment fund, small personal assets that cannot be directly invested in national debt can be indirectly invested in national debt. At the same time, individual investors can also indirectly participate in national debt through banks, insurance, etc. Market, providing a stable source of funds for the development of the national debt market.

Rich variety of national debt

Third, enrich the variety of treasury bonds, resume the trading of treasury bonds at an appropriate time, gradually introduce derivative products, and enhance the function of the treasury market to evade interest rate risks. In short, from the perspective of interest rate marketization, due to the imperfect price discovery function, market adjustment function, and the function of evading interest rate risk in the government bond market, which hinder the process of interest rate marketization, the function of the government bond market should be developed and improved as soon as possible to accelerate interest rates The process of marketization is also an urgent issue after China's entry into the WTO.