Using treasury bonds for investment is a planned allocation of idle resources by the government. It supports the country to maintain a higher level of investment, raise construction funds, expand the scale of construction, and expand construction scale under the macroeconomic situation of insufficient domestic demand and weak exports. An important prerequisite for the smooth adjustment of the economic structure; the issuance of treasury bonds is an important means for the government to make up for the fiscal deficit, adjust the structure, regulate currency circulation, affect foreign exchange receipts and payments, and promote the balance between supply and demand; the credit tool provided by treasury bonds is While initiating investment, it provides an ideal tool for open market operations and further promotes the reform of securities and financial markets. The role played by national bonds has a significance that cannot be underestimated in the overall balance and stable development of the macro economy.

In January 1981, our country promulgated the "Treasury Bill Regulations of the People's Republic of China", and the Ministry of Finance began to issue treasury bonds. After 25 years of development, my country's government bond market has undergone earth-shaking changes, which are reflected in the following aspects:

1. The issuance scale has increased rapidly

Over the years, the issuance scale of my country's government bonds has Rapid increase. As shown below.

2. There are many types of issuance

There are two types of issuance of national debt in my country: certificate type and accounting type. The former is aimed at the public, and the latter is mainly aimed at institutional investors. The former is less liquid, while the latter can be bought and sold in the interbank bond market or exchange market. In terms of terms, there were no government bonds with a term of less than one year before 2005. Since 2006, real short-term government bonds have been issued. There are also very few issuances of long-term bonds. For example, on July 31, 2001, the Ministry of Finance issued the seventh issue of 2001 book-entry treasury bonds with a maturity of 20 years.

3. The issuance method of national debt is becoming more and more reasonable, although there are still some problems

From 1981 to 1990, the issuance of national debt in our country basically relied on administrative apportionment.

In 1991, the Ministry of Finance organized the underwriting and underwriting of government bond issuance for the first time, which marked the initial establishment of the primary market for government bonds. The underwriting system is a negotiated market issuance system. This issuance method has two characteristics: first, the underwriting contract determines the rights and obligations of the issuer and the underwriter; second, the underwriter distributes to investors, but the distribution cannot go out. The portion is subscribed by the underwriters themselves.

Since the ninth issue of book-entry treasury bonds in 1999, China’s treasury bond market issuance has basically adopted a bidding mechanism. Judging from the subject matter of the bidding, it has gone through payment period bidding, price bidding and yield bidding; judging from the bidding rules, the Ministry of Finance has successively adopted the "Dutch-style" single-price auction method in the issuance of short-term discount treasury bonds. Multiple-price auctions are used in the issuance of medium- and long-term treasury bonds and interest-bearing bonds. Of the 14 periods of book-entry treasury bonds issued in 2004, only 4 were auctioned at a single price, while the remaining 14 were auctioned at multiple prices.

In my country, only members of the treasury bond underwriting group have the right to participate in book-entry treasury bond auctions, including competitive bidding and non-competitive bidding. Other institutional investors or individuals can only participate in the purchase of certificated treasury bonds, or subscribe for treasury bonds from underwriters participating in treasury bond bidding.

In order to carry out necessary bid screening, the Ministry of Finance usually not only stipulates the minimum and maximum bid volume limits before the Treasury bond auction, but also usually sets a certain bidding price range. This measure will also reduce the number of independent bidders and encourage small-scale investment institutions and individuals to bid and merge, thereby producing the effect of non-competitive behavior in the bidding process. For example, on July 31, 2001, the Ministry of Finance issued the seventh issue of 2001 accounting-type treasury bonds, with the bidding range set at 4.25% and 5.25%, and the term is 20 years. Since the market generally believes that the issuance interest rate is high, it is highly sought after in the issuance range. A large number of self-operated dealers borrowed funds to purchase treasury bonds, and the price of the treasury bonds rose rapidly by more than 20% after they were listed. This shows that if a wrong price range is set, it will have an impact on the market, or affect the issuance of national debt, or affect the financial burden of national debt.

4. The government bond trading market is active and the trading methods are flexible

Treasury bond transactions include spot transactions, repurchase transactions, as well as forwards and interest rates launched in June 2005 and February 2006. Interchanges occur one after another. Futures trading on Treasury bonds is also expected to resume.

Before 1997, Treasury bond transactions were basically spot transactions. In 1997, inter-bank bonds launched pledged repurchase business. In the treasury bond market, the volume of pledged repurchases has always been greater than the volume of spot bonds traded. Pledged repurchases provide a good way for investors to obtain short-term financing. In 2004, my country launched buyout repurchase. This method helps the circulation of bonds and also helps achieve arbitrage in the market, which is beneficial to the pricing of bonds.

my country’s bond trading market includes the inter-bank market and the exchange market. The transaction size of both markets has grown significantly. Take the interbank market as an example. The total transaction size in 2006 was 38,205.3 billion yuan, while in 2001 it was only 4,094 billion yuan. In 4 years, the transaction volume has increased nearly 8 times.

In our country, the scale of inter-bank transactions is much larger than that of the exchange market. As shown in the table below.

Note: (1) Repurchase transaction data since 2004 includes pledged repurchase and buyout repurchase; (2) The transaction amount of spot bonds only counts buying or selling data; (3) ) The number of repurchase transactions and the amount of repurchase transactions are the data of the first period.

Data source: China Bond Information Network.

In the inter-bank market, 7-day pledged repo accounts for the largest proportion of transactions, accounting for nearly 75% of all pledge transactions.

5. The central bank’s open market operations were carried out

In May 1998, the People’s Bank of China resumed its open market operations, effectively promoting the development of the inter-bank bond market. The central bank regulates and guides the transactions of primary dealers in the market through open market operations, and transmits and affects the bond transaction settlement business of the inter-bank bond market; the bond repurchase rate of the central bank's open market operations becomes the inter-bank bond repurchase rate the guiding interest rate.

6. The trading mechanism has become more complete, the market trading entities have expanded, and the number of participants has increased

In April 2000, the National Interbank Bond Market Bond Transaction Management Measures were promulgated, and the following institutions can become national Participants in the inter-bank bond market, engaged in bond trading business: (1) Commercial banks with legal personality in China and their authorized branches; (2) Non-bank financial institutions and non-financial institutions with legal personality in China; ( 3) Branches of foreign banks approved by the People's Bank of China to engage in RMB business.

On April 15, 2002, the access system for inter-bank bonds was changed from the approval system to the filing system. The access registration system has been implemented, and the national inter-bank bond market has been opened to all financial institutions that can invest in treasury bonds and financial bonds, as well as all types of investment funds, which has solved the problem of insufficient trading entities in the inter-bank bond market to a certain extent. Starting from June 17, 2002, commercial bank over-the-counter book-entry treasury bond transactions began to be piloted, bringing individual investors into the inter-bank market. On October 29, 2002, the interbank bond market was opened to non-financial institutions. On February 16, 2004, the interbank bond market was opened to foreign banks. In 2006, there were 6,439 investors who directly or indirectly opened primary custody accounts with China Central Government Bond Corporation. Overall, the categories of investors are quite broad, covering almost all types of investor groups. In terms of trading mechanism, there has been a transition from unilateral quotations in the past to bilateral quotations. Bilateral quotation is actually a foreign market maker system. This system is very beneficial for active bond trading and better discovery of bond prices.