The Central Bank opens the door to policy and market interaction by conducting treasury bond trading in the secondary market

　　 Original title: Yicai editorial: The central bank opens the door of policy and market interaction by conducting treasury bond trading in the secondary market

The real situation in the economic and financial system is smoothly reflected in the decision-making system and decision-making process of fiscal and monetary policy, so as to establish a strong interaction between the decision-making structure and the market.

On the 23rd, the head of the central bank's relevant department said in an interview that the central bank's treasury bond trading in the secondary market can be used as a liquidity management method and monetary policy tool reserve.

The person in charge pointed out that the central financial work conference proposed that "we should enrich the monetary policy toolbox and gradually increase the purchase and sale of government bonds in the open market operation of the central bank". The size of China's government bond market has ranked the third in the world, and the liquidity has significantly improved, which makes it possible for the central bank to carry out the purchase and sale of cash bonds in the secondary market.

This statement received great attention from all walks of life.

First of all, as the above person in charge of the relevant departments of the People's Bank of China said, some central banks in developed economies were forced to buy government bonds on a large scale in a one-way way to achieve the monetary policy goals when the conventional monetary policy tools were exhausted, while China insisted on the implementation of normal monetary policies. The People's Bank's buying and selling government bonds is quite different from the quantitative easing (QE) operations of these central banks.

Article 29 of Chapter IV of the Law of the People's Bank of China stipulates that the People's Bank of China may not directly subscribe for or underwrite national bonds and other government bonds. That is, the central bank is prohibited from buying government bonds in the primary market.

However, the People's Bank of China's participation in treasury bond trading in the secondary market is part of the central bank's monetary policy tools. Article 23 of Chapter IV of the Law of the People's Bank of China lists six monetary policy instruments that the People's Bank of China can use to implement monetary policies, including "buying and selling national bonds, other government bonds, financial bonds and foreign exchange in the open market".

Open market operation means that the central bank releases base currency to the market for liquidity support. The central bank buys and sells government bonds from market participants in the secondary market, which is a support to the liquidity of market participants.

Buying and selling government bonds through the secondary market as a liquidity management method and a reserve of monetary policy tools is a more standardized and transparent standard operation of monetary policy, which helps to more effectively perceive the market's temperature and improve the sensitivity and adaptability of monetary policy to the market.

At present, the open market operations of the People's Bank of China generally include repo transactions, cash bond transactions and issuance of central bank bills. The repo transactions include positive repo and reverse repo. The cash bond transactions include cash bond buyouts and cash bond sales. The central bank regulates market liquidity by releasing and repurchasing base currency.

The central bank buys and sells treasury bonds in the secondary market, which is a way of spot bond trading by the central bank. Compared with repo transactions, re loans and other basic currency delivery methods, cash bond transactions can more directly perceive the market temperature, and more clearly capture the reality of market entities Display Preferences So as to improve the accuracy of monetary policy and finally form an immediate feedback mechanism of trend interaction with the market. At the same time, it can also effectively establish a feedback mechanism on monetary and fiscal policies, and improve the sensitivity and adaptability of monetary and fiscal policies to economic and social changes.

Taking fiscal and monetary policies as an example, the marginal effects of two major policies are decreasing. For example, the feedback chain of fiscal policy in the economic system shows a marginal decreasing trend, and the multiplier effect of fiscal funds is marginal decreasing; At the same time, in terms of monetary policy, there are some problems such as capital precipitation and idling. Whether loose monetary policy is conducive to high-quality economic development has become a realistic problem that we have to be vigilant about. At present, a large amount of money is idling in the money market and cannot enter the real economy. In addition, although the policy interest rate has been lowered a lot, the market real interest rate is still high because of the risk premium. The economic system is plagued by overcapacity, reduced asset turnover and other factors.

In the face of this situation, the central bank purchases and sells national debt in the secondary market, which can smoothly reflect the real situation in these economic and financial systems into the decision-making system and decision-making process of fiscal and monetary policies, so as to establish a decision-making system mechanism Strong interaction with the market.

The specific trend interaction logic is that if the problems such as tight credit in the market cannot be solved, the market subject will not accept the central bank to purchase its national debt at a lower interest rate based on the consideration of opportunity cost, etc. The price provided by the central bank can only buy national debt in the secondary market if it is close to the sum of its national debt discount rate and opportunity cost. This reflects that the financial sector, even though market participants will be willing to accept low interest rates due to the risk-free return of national debt, will also consider the difficulty of repairing their balance sheets to evaluate whether it is more cost-effective.

Of course, the effectiveness of the central bank's policy on spot bond trading needs to be based on a sound national debt structure and national debt yield curve. Only the treasury bonds are rich in short, medium and long term structures, and have formed a fully market-oriented treasury bond yield curve, can the central bank's open market operation based on spot bond trading be more effective, and the interaction between policies and the market be real and effective.

The economic and social system is a Co selection The system needs the mutual promotion, inclusiveness and progress of policies, institutions and markets. If policies and systems are the force of foreign aid, then only when they are compatible with the endogenous force of the market can the force of flood and famine be released. Therefore, fiscal and monetary policies can only have a boost effect if they blend with the market; The central bank is ready to start spot bond trading, which opens a door for interaction with the market.