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Bank of China (BOC) on Tuesday launched its RMB (renminbi) Bond Trading Index - a move that comes amid gradual internationalisation of China's capital markets and its currency.
The index will allow overseas investors to understand the interbank bond market, track market prices, and raise the efficiency of trading. Unlike other broad-based indices, the BOC Bond Trading index is built on the most liquid bonds available, which makes it a better guide of market movements, the bank said. This index return is also more easily replicated, which is important for index products to be created and sold by fund managers.
The index includes indices for Chinese government bonds - which are issued by China's Ministry of Finance - and what it calls "policy financial bonds", issued by China Development Bank, Agricultural Development Bank of China, and The Export-import Bank of China. Each index will comprise 13 sample bonds of various tenures, with a rebalancing done every month. Investors can track both the impact of interest rate fluctuations alone on bond prices, and the total gain or loss from capital gain linked to interest-rate fluctuations, as well as interest income.
The index was launched globally, with ceremonies held in Singapore, Beijing, and London.