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Banks to sell first batch of NCDs worth US$3.1b
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Five Chinese state-owned banks will sell a combined 19 billion yuan (US$3.1 billion) of the country’s first negotiable certificates of deposit today, after the central bank unveiled the new financial tool on Sunday.
The Agricultural Bank of China, the Bank of China, China Construction Bank, China Development Bank and the Industrial and Commercial Bank of China will offer tenors of one month, three months and six months, they said in separate announcements on the website of the Shanghai Clearing House yesterday.
An NCD is a fixed-term deposit that can be sold in secondary markets.
The NCDs are priced according to the Shanghai Interbank Offered Rate. The six-month tenor will be priced at 97.450 yuan, the clearing house said, while the three-month tenor will be priced at 98.734 yuan and the one-month tenor at 99.5691 yuan.
The certificates are the first batch to be issued after the People’s Bank of China on Sunday allowed 10 commercial banks to pilot sales of them on the interbank market. The trial offers a channel for the lenders to borrow at more stable costs.
Offering the certificates in the interbank market is seen as a step toward liberalizing interest rates as they allow buyers and sellers to negotiate prices.
But Zhang Zhiwei, an economist at Nomura, said the economy’s downside risks, growing pressure from bad loans, and already rising market interest rates may delay the government’s move to further liberalize the rates.
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