Bank of China launches index to track yuan bonds

Bank of China (BOC) launched an index yesterday that will make it far easier for foreign institutional investors to trade in yuan-denominated bonds.

The RMB (renminbi) Bond Trading Index, as it is called, comes after China widened foreign access to its domestic bond market in July.

The index aims to track the market's performance and help investors build investment portfolios, said BOC chairman Tian Guoli, who was speaking at a launch ceremony in Beijing. Ceremonies were also held simultaneously in Singapore and London.

Mr Tian added that the index could also help central banks and regulatory authorities around the world better understand Chinese financial markets.

Unlike other similar indexes, the BOC index will include only the most liquid bonds. This will allow it to better follow market movements, while investors will be able to replicate the index returns more easily.

Yuan-denominated financial assets are attracting huge investments, with the interbank bond market alone worth around 25 trillion yuan (S$5.45 trillion).

The amount of such assets held by overseas investors had reached about 4.34 trillion yuan by July this year, including nearly 800 billion yuan of bonds.

Almost 90 per cent of these bonds are either Chinese government bonds issued by the finance ministry or what are known as policy financial bonds, which are issued by other organisations, including the China Development Bank.

The BOC index comprises the most liquid bonds in these two categories.

A version of this article appeared in the print edition of The Straits Times on October 21, 2015, with the headline 'Bank of China launches index to track yuan bonds'. Subscribe