SHANGHAI, April 10 (Xinhua) -- Three Chinese commercial banks signed membership agreements with the China Financial Futures Exchange on Friday, becoming the first batch of commercial bank members of the country's major futures exchange.
It marks China's commercial banks enter the country's treasury bond futures market for the first time, ten years after China launched the financial derivatives.
The three commercial banks are Industrial and Commercial Bank of China, Bank of China, and Bank of Communications.
Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said that interest rates are the most important financial market price, and treasury bond futures are a tool for interest rate discovery and interest rate risk management.
As the largest holders of treasury bonds, the participation of commercial banks marks a new step in the development of China's treasury bond futures market and is of great significance for the formation of a unified and efficient financial market, Fang added.
In February, China allowed eligible pilot commercial banks and insurance institutions with investment management capabilities to participate in the treasury bond futures trading of the China Financial Futures Exchange.
China's commercial banks and insurance institutions are important treasury bondholders. By the end of February, the treasury bond held by commercial banks was nearly 10 trillion yuan (about 1.42 trillion U.S. dollars), accounting for about 65 percent of the total amount of treasury bonds in custody.
Ren Deqi, chairman of Bank of Communications, said that commercial banks' entry into the treasury bond futures market is conducive to enhancing interest rate risk management capabilities and serving the real economy.
The positions and trading volume of China's three treasury bond futures have achieved steady growth.
Statistics from the China Futures Association showed that in 2019, the three treasury bond futures transactions totaled more than 13 million lots, an increase of nearly 20 percent over the previous year.
Chinese bonds are increasingly favored by international investors.
In the first quarter of this year, 26 foreign legal entities were added to the China Interbank Bond Market, and the net increase in holdings of foreign institutions was 59.7 billion yuan.
As of March, a total of 822 foreign legal person institutional investors entered the China Interbank Bond Market, with a holding scale of 2.26 trillion yuan.
Chinese government bonds have also been included in JPMorgan's Government Bond Index-Emerging Markets (GBI-EM) indices from February.
According to the report released by the Chief Investment Office of UBS, Chinese government bonds are more attractive than the U.S. government bonds. For foreign investors, attractive interest margins and a stable RMB exchange rate support the prospects for Chinese government bonds.
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