By Wang Lan (China Daily)
Updated: 2008-01-29 09:18

China Securities Index Co yesterday launched three new bond indices, covering for the first time all bonds traded on the interbank and stock markets.

The new indicators are of government, financial and corporate bonds and set the reference level at 100 points based on the prices of selected bonds quoted on December 31, 2002.

Analysts said the new indices should serve as a barometer for bond issuers, financial intermediaries and investors.

The indices are also expected to provide economic planners with a reliable indicator of market-oriented interest rates to enable prompt macroeconomic policy decisions.

Tian Hongqin, an analyst at CITIC China Securities, said the new indices will be the first to reflect the performance of all bonds traded on the interbank and stock markets.

"As the first series of benchmark indicators reflecting the performance of all bonds in the two markets, the introduction of the three indices will help establish a comprehensive system of bond benchmarks. That will benefit both bond issuers and investors," said Tian Hongqin.

Other analysts suggested corporate bond trading be expanded to the interbank market. New regulations on corporate bonds limit the trading of those instruments on the stock market. Adding the interbank market would help increase liquidity.

Experts said the new indices are a step forward and would act as a bridge between the stock and interbank markets for fixed-income securities.

Many analysts said that as the bullish stock market stumbles and banks tighten the screws with higher lending interest rates, many companies are turning to long-term capital markets to find funds.

"Increasing demand for a longer-term capital market and greater links between the interbank and stock markets are widely regarded as the bullish factors that will drive up the Chinese bond market in 2008," said Nie Wen, a bond analyst at Industrial Securities in Shanghai.