Bond prices on China's interbank market fell on Thursday, dragged by investors' profit taking after hearsay said the Chinese central bank floated directive repos to some banks.
ChinaBond New Composite Total Return Index, a broadly-based market sentiment indicator, plunged 0.1111 percent to 161.6381 points on Thursday.
Turnover dropped 0.7 percent to 1.897579 trillion yuan for the day, contributed by 251.224 billion yuan in cash bonds trading, 1.643945 billion yuan in pledged and outright bond repos and 2.410 billion yuan in bond lending.
On Thursday, Reuters cited two sources as saying that China's central bank sold 7-day, 14-day and 28-day repos to part of large banks because they applied as they had too much liquidity but could not repay in advance their mid-term lending facilities.
Hampered by the news, most local bond investors chose to take profit, which once pressed down cash bonds in intraday trading Thursday.
However, as analysts said these repo sales pointed only to the Chinese central bank's fine-tuning of excessively fluid liquidity rather than changing of monetary policy keynote, local bond market recovered somewhat by closing.
Interbank Treasury yields, which move inversely with their prices, jumped 2.63-15.74 basis points (bp) on Thursday.
Financial bonds prices declined on Thursday as their yields generally edged 1.89-5.96 bps higher than Wednesday.
(Policy bank here refers to the Agricultural Bank Development of China and the Export-Import Bank of China, both of whose bonds can enjoy zero risk weighting until maturity.)
(China Development Bank is an ex-policy bank and the second largest Chinese bond issuer following China's Ministry of Finance who sells Treasury bonds in China. Its bonds sold before the end of 2015 can enjoy zero risk weighting.)
Interbank debenture bonds softened on Thursday. The averaged yields for AAA-rating corporate bills stepped up 1.70-9.77 bps over the last trading day.
China money market ran steadily on Thursday. The benchmark 7-day Shanghai Interbank Offered Rate (Shibor), a quasi of Libor, inched down 1.50 bps to 1.9520 percent over Wednesday.
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