China is planning to allow domestic commercial banks to trade bond futures in an effort to increase hedging tools and attract foreign investors to the domestic bond market, sina.com reported, citing the Financial Times.
The new rule is expected to be enacted at the end of this year, the report said. Presently, only brokerages and a few other types of buyers are allowed to trade bond futures and the trading volumes are thin, it said.
Although the new rule is not for foreign investors, participation of domestic commercial banks can largely boost liquidity in the market and help with price discovery across the broader bond market, the report said.
It is estimated that over US$100 billion could flow into the Chinese bond market by early 2020 after the addition of government and policy bank bonds to the Bloomberg Barclays Global Aggregate Index.