China Development Bank (CDB) issues the first batch of financial bonds with the amount of RMB12 billion on the Shanghai Stock Exchange (SSE) on December 27, which is a beneficial pilot of the Central Bank and the China Securities Regulatory Commission (CSRC) in deepening the reform and promoting the development and the interflow between on-floor and over-the-counter bond markets and has received full attention and positive response from market players.
After the 18th CPC National Congress put forward the goal of deepening the reform in an all-round way and the requirement of reforming the financial system, the State Council took the development of the bond market as an important measure to support the economic structural adjustment and the transformation and upgrading, decided to steadily expand the issuance of bonds, and promoted the interflow between on-floor and over-the-counter bond markets. CDB financial bonds were issued and traded only in the inter-bank market before, and the Central Bank and the CSRC have taken the promotion of the pilot cross-market issuance and trading of CDB financial bonds as one of the important contents for improving the bond market system. In the first half of this year, the two authorities decided to carry out pilot issuance on the SSE with the amount of RMB30 billion, specified the pilot issuance scheme, the listing and trading arrangement, and the coordination mechanism of regulation after studies for several times, and led CDB and the SSE to determine the pilot issuance measures and the business rules. In the reform of the cross-market issuance and trading of financial bonds, efforts have been made to form concerted efforts, stick to the piloting in advance, conduct steady promotion, and strengthen system design, so as to ensure the success of the pilot work.
The first batch of pilot issuance involves two kinds of products, the two-year bonds of RMB8 billion and the five-year bonds of RMB4 billion, both issued by tendering. A total of 47 members in the underwriting group, constituted by such financial institutions as commercial banks, insurance institutions, and securities companies, have carried out bidding through the SSE bond issuance system, and the bidding and tendering processes are fair and conforms to relevant rules. According to the tendering result, the coupon rate of the two-year bonds is 5.8% and that of the five-year bonds is 5.84%, both conforming to the market expectation and the current coupon rate level. The two kinds of products will be listed for trading on January 7, 2014. Market players have paid high attention to regulatory authorities’ measures on improving the bond market system and promoting the interflow, and actively participated in the cross-market issuance and trading of CDB financial bonds. The underwriters have actively participated in the bidding despite the financial strain and the high market interest rate at the end of the year, and other investors have presented their wills to subscribe and invest after the bond distribution and the bond listing for trading.
The successful pilot issuance of CDB financial bonds, which has reflected the deepening of the reform of bond issuance and trading by the Central Bank and the CSRC, will facilitate the free flow of financial assets. Besides, it marks an important step further towards the building of a unified and open bond market with orderly competition, gradually makes markets to play decisive roles in allocation of resources, and enables market players to gain many benefits. In terms of the issuer, as CDB raises funds mainly through bond issuance, it will further expand its issuance channels, make full use of all markets for financing, improve the assets and liability management, and better serve China’s economic and social development goals. With regard to the investors, the SSE bond market includes large numbers of individual investors in addition to institutional investors. According to relevant business rules, individual investors can invest in CDB financial bonds, which enjoys quasi sovereign credit, taxation advantage, and high net return on investment, as well as allows investors to share investment incomes and the results of the Reform and Opening-Up and the economic construction. Besides, for the trading place, the pilot issuance will help to improve the bond issuance and trading system, strengthen the interflow and the business coordination, propel the forming of a unified price and a unified yield rate curve on the bond market, consolidate the foundation for China’s interest rate liberalization, and boost the construction of the financial market system, thus serving the development of the real economy.