SINGAPORE - Bank of China (BOC) launched its RMB (renminbi) Bond Trading Index on Tuesday (Oct 20), a move that comes after China widens foreign access to its domestic bond market in July.
The index will help foreign investors such as foreign central banks, sovereign wealth funds, and international financial institutions understand the interbank bond market, track market prices and improve trading efficiency, said the bank.
The index was launched globally, at events held in Singapore, Beijing and London on the same day.
Foreign investors have been granted unlimited access to the 25 trillion yuan interbank bond market since July, as China continues efforts to open up its capital markets and internationationalise its currency.
Nearly 90 per cent of the portfolio holdings are in Chinese government bonds issued by China's Ministry of Finance and "policy financial bonds" issued by China Development Bank, Agricultural Development Bank of China, and the Export-Import Bank of China.
The BOC index includes two sub-indices for each of these two types of bonds. Each comprises 13 sample bonds of various tenures, with rebalancing done every month.
With the "clean price" index, investors can track bond prices due to interest rate movements, while the "dirty price" index will allow investors to track the bond prices inclusive of interest income, which is a better indicator of the overall portfolio returns.
Unlike the existing broad based indices, the BOC index only includes the most liquid bonds, which allows it to better follow market movements. Investors can also replicate the index returns more easily.
The index is run by the BOC Shanghai RMB Trading Unit. Price information is maintained in Bloomberg and Thomson Reuters EIKON every trading day, and monthly reports are available on the BOC website at the end of the every month.