Bonds News
- Bank deal for central funds
Date: 8-Dec-2006 Sources: (Xinhua Online)
China Wednesday for the first time deposited government cash with commercial banks as the country hopes to bolster returns of its treasury money.
The central government has placed 20 billion yuan (2.6 billion U.S. dollars) of cash from the treasury with lenders for a 90-day period ending on March 6, the People's Bank of China said in a Website statement yesterday.
The deposits will carry an annualized interest rate of 2.7 percent, based on an auction held yesterday with commercial lenders, the central bank said.
China's Ministry of Finance now deposits most of its 1.42 trillion yuan in treasury funds at the central bank, with a yearly interest rate of 0.72 percent.
The country initiated a campaign in June to allow government cash to buy back treasury bonds and be deposited at commercial banks as part of bids to place the money for better returns.
The Ministry of Finance in September bought back 18.6 billion yuan of treasury bills and made a profit of 44 million yuan from the deal, according to the National Debt Association of China.
Banks qualified as underwriters for government debt and primary dealers on the interbank market are eligible to bid to manage the treasury money, the central bank said yesterday, without disclosing winners' names.
The central bank and the Ministry of Finance last month signed agreements with 52 commercial banks, including the country's Big Four lenders, to let them participate in the program to divert the treasury's cash.
'The cash management system can boost the efficiency of treasury capital and help the government better set out the monetary policy,' said Zhan Jingtao, chief of the treasury management department at the Ministry of Finance, in an earlier statement.
'Letting the money re-purchase treasury bills can also boost liquidity on the interbank market.'
Analysts said the higher rate for the auction, compared with the 1.80 percent bank rate for three-month deposits, might be linked to needs from smaller commercial lenders to meet deposit-growth targets.
'The rate is much higher than I expected,' said Dong Dezhi, a Bank of China analyst. 'I suppose much of the money has been deposited at smaller joint-stock lenders which have to meet certain targets on deposits.'
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