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Central bank bills swap to boost liquidity

The People's Bank of China on Thursday conducted a new central bank bills swap operation in support of perpetual bonds issued by commercial banks. The swap, valued at 2.5 billion yuan ($363.5 million), is open to primary dealers for bidding at a fixed rate at 0.25 percent, according to a central bank statement. The swap will mature on June 27, 2020.Following the first CBS operation in February 2019, the new operation aims to "raise the liquidity of banks' perpetual bonds and support their issuance of perpetual bonds", the central bank said. The CBS scheme allows dealers to swap the perpetual bonds they hold for central bank bills, which will effectively boost market demand for perpetual bonds but have a neutral impact on liquidity in the banking system. Perpetual bonds are fixed-income securities with no maturity date and are not redeemable but pay a steady stream of interests forever.

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