China MOF to Test ‘When-Issued’ Trading of Government Bonds

China’s finance ministry said it will begin a trial allowing investors to trade government bonds before they are sold to help develop the market.

The Ministry of Finance said the so-called when-issued trading can start four working days before the auction date and end one day ahead of the actual sale, according to a statement on its website. It didn’t say when the program will kick off. The system will “facilitate the healthy development of the government bond market,” it said.

When-issued trading allows governments to gauge demand for securities before proceeding with the issuance. Japan started such a system in 2004 after the first failure of a 10-year bond auction since the country began selling debt by competitive bidding in 1989.

China’s central bank proposed rules for when-issued trading in December 2005.

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