The pricing mechanism of China's bond market is constantly improving. The People's Bank of China recently issued an announcement that in order to standardize the bond valuation business in the interbank bond market, protect the legitimate rights and interests of market investors, and promote the stable and healthy development of the bond market, the People's Bank of China has formulated the Administrative Measures for Bond Valuation Business in the Interbank Bond Market, which will come into effect on January 1, 2024.
In terms of content, the Measures refer to the experience of mature markets and the practice of China's bond market, focus on the neutrality, fairness, professionalism and transparency of valuation institutions, stipulate the basic conditions of internal control, operation and technology that valuation institutions should have, clarify the requirements for internal governance, data source selection and use, valuation methods, information disclosure, etc., require the improvement of valuation technology and transparency, and encourage diversified competition among valuation institutions.
Compared with the draft released in June this year, the Measures are more consistent in terms of overall thinking, and there are many new focuses and highlights. Song Weijian, deputy general manager of the credit business innovation department of China Debt, analyzed that the changes are mainly reflected in Article 14, on the basis of "encouraging the selection of products from multiple valuation institutions" in the draft for comments, further emphasizing the details and precautions for the application of multiple valuation sources, adding expressions such as "encouraging users to strengthen the internal valuation system and quality construction", requiring users of valuation products to "not adjust investment profits and losses by arbitrarily changing valuation products".
In practice, the rational use of multiple valuation agency products is conducive to eliminating the possible adverse effects of relying on a single valuation source, and is also conducive to meeting the diversified needs of the bond market in different business scenarios, such as the demand for valuation and pricing in the field of primary issuance. Song Weijian said that on the one hand, multiple valuation sources can provide diversified references for market institutions, prevent a single valuation result from causing a single ** expectation, and make market pricing more diversified. On the other hand, cultivating a number of valuation institutions can better encourage valuation institutions to compete to provide better services for market institutions, continuously improve the technical level, and promote the healthy development of the entire industry.
The Measures also require that valuation institutions should always maintain objectivity and neutrality, continue to improve the fairness of bond valuation products, establish clear, standardized and transparent data use standards and levels, and the selected data can truly reflect the market situation, emphasizing that data sources should be used cautiously and pay attention to the reliability of the market in the case of large market fluctuations. At the same time, the valuation agency is required to disclose the valuation product information, valuation method, data ** and use level, method change and termination transfer in a true, accurate, complete and timely manner, and publicly release the valuation product quality report to accept market inquiries.
Song Weijian introduced that the valuation and pricing system built by China Bond Credit Co., Ltd., which aims to reflect the fair value of bonds and takes credit risk judgment as the source, has three characteristics and advantages: returning to the origin of credit risk pricing, counter-cyclical adjustment and higher transparency. Market institutions can refer to and use multiple institutional valuation products in different business scenarios, and effectively give full play to the advantages and value of different types of valuation institutions.
The issuance of the "Measures" is an important measure to implement the requirements of the ** Financial Work Conference on promoting the high-quality development of the bond market, which is conducive to improving the service level of valuation institutions and improving the pricing mechanism of the bond market. The People's Bank of China said that in the next step, it will strengthen the management of bond valuation business, improve the bond valuation system, deepen the function of the bond market, continuously improve the benchmark role and transmission function of bond market pricing, and accelerate the creation of a modern financial market system. (Economic ** reporter Yao Jin).