Bond Repurchase Market Development

Treasury bond repo is one of derivatives of bonds. Treasury bond repo is essentially a short-term margin behavior using Treasury bonds as mortgage. Along with the continuous enlarging of our bond publishing scale, the Treasury bond repo market is also gradually developing and getting strong.Besides as a tool of investment and arbitrage, Treasury bond repo is an important tool of monetary policy and fiscal policy. As a derivative market of bond market, the repo market is greatly affected by the bond market in aspects of scale, category, etc. In the same time, the repo market affects inversely the bond market's issuance, scale and development. Treasury Ministry control the macro economy by issuing bonds and National Central Bank realize its short-term monetary targets with Treasury bond repo. Therefore, Treasury bond repo becomes an important combination point of the fiscal policy and monetary policy.Limited by factors of history and the developing level of security market, Treasury bond repo market in China has many problems. The whole repo market splits into inter-bank market and exchanging market. Inter-bank market is stable comparing with exchanging market because of the abundant funds and good management, but its bond settlement system cannot satisfy the needs of modern trading. The situation is worse in exchanging market. For the good and bad participants in exchanging market are intermingled and trading system is not complete, the exchanging repo market easily falls into confusion and emerges risk, even threaten the safety and the stability of whole securities market. So many problems result that the Treasury bond repo market's financing function and political function cannot be bring into good play.The thesis contains four parts: The first part chiefly introduces some basic principles. The second part analyzes the current situation and problems in Chinese Treasury bond repo market. The third part introduces the actual state of Treasury bond repo market in the developed countries and summarizes some experiences,which we can use for reference in China. The fourth part proposes the suggestions for Chinese Treasury bond repo market reform.