Economics
PBOC Makes First Use of New Tool Aimed at Boosting Bank Capital
- Move to encourage liquidity of perpetual bonds, not QE
- Favorable fee shows willingness to support market: analyst
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China’s central bank announced the first of a new kind of market operation which aims to encourage financial institutions to issue perpetual bonds to boost their capital.
The People’s Bank of China swapped 1.5 billion yuan ($223 million) of 1-year central bank bills for perpetual bonds with a coupon of 2.45 percent, according to a statement on its website Wednesday morning. The PBOC announced the new tool last month and so far, the Bank of China has issued 40 billion yuan worth of perpetual bonds.