| The main idea of this thesis is the necessity and the feasibility of carrying out the interest rate future market. As a matter of fact, interest rate future is not novel in China. There had been a pilot project of T-bond future exchange between the year 1992-1995, which failed because of the immaturity of the Treasury Security market and the lack of risk control measure. But ever since then, the Treasury Security market has grown rapidly. This makes the T-bond market become more and more important in one respect, and exposes the holders of the security in the interest rate risk in the other. That's the reason for the voice to carrying out an interest rate market becomes clearer and clearer than ever in the market: they need a way to hedge their risks, and obviously, interest rate future market provides this kind of facility.Analysis shows that interest rate in China will go up in the near future, which is not a good message for the holder of fixed-income security, such as T-bond. From May 1st, 1996, the People's Bank of China, the central bank of China, reduces interest rate by six times. Now the level of IR is almost at its lowest level in history. But interest rate is still regulated by the government and cannot float freely in China, which distorts the supply-demand relationship in the money market. The result is that the situation of short of supply in fund market is hided. Once the interest rate is no longer controlled by the government, it will go up to uncover this truth. As a plan of the Chinese government, GDP will quadruple in the next 20 years, which means a 7.1% growth per year. Such a high growth rate will no doubt exert an up pressure to the interest rate. On the other side, the economic cycle will be more sophisticated than ever with the China's entry into WTO. Then the interest rate, once deregulated, will float irregularly and difficult to predict. In a word, in near future, the interest rate will tend to go up while the range and frequency of interest rate fluctuation becomes larger. The holders of treasury security, especially long-term debts, need a way to hedge the risks of the dropping of security price. All these signs show that an interest rate future market is necessary for China's financial market.But obstacles and risks remain. First, the capacity of the national debt spot market is the foundation that determines whether the future market can put out or not. It is one kind of risky behavior to introduce the future market on the basis of insufficient capacity of a spot market, or, one kind of gambles. The last 8 years have witnessed the great development in national debts market, however, at the present stage of our country, the spot market is still slightly small in capacity compared with the market of developed country, and such a small market may not be enough to support the introduction of the interest rate future market. Secondly, the term structure of treasury security market is unreasonable. Most of the bonds are 7-10 years to maturity, lacking in short-term variety, such as 3-month, 6-month, 9-month, and 1-year bond. This hinders the forming of Bench Mark Curve in interest rate, which proves to be the most important curve in the IR system, and the foundation of pricing financial derivatives. This unreasonable term structure weakens the price-revealing function of a future market. Thirdly, an incomplete marketization of interest rate makes the fluctuation of IR comparably steady, which reduces the demand for risk-hedging means. Last, spot market mobility is insufficient. More ever, the market is divided into three parts: the market among banks, exchange market, and OTC. Needless to say, this reduces mobility further more. Being one kind of derivative, interest rate future is more risky than the bond market, as was proved in 1995. Then, is it possible to put out an interest rate future market now? The answer is, based on some analyses, yes. This can be seen in the following aspects. Based on the data in the last 8 years, we can found that na... |
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