Introduction
The Treasury Bond Leveling Fund (TBFLF) was established by the Chinese government in 1995 to reduce the volatility of long-term government bonds, by providing a stable market for long-term bonds. The TBFLF was established in an effort to improve the tenure of the long-term bond market, reduce yield volatility and then, improve the investor protection. At present, the TBFLF, which is managed by the Ministry of Finance, supports the stability of the long-term bond market in China .
Purpose of the Treasury Bond Leveling Fund
The primary purpose of the TBFLF is to increase the influence of the Central Bank of China (CBC) in the long-term bond market. By doing so, the CBC will be able to use its own money to make investment in the long-term bond market and thus regulate the prices in the market accordingly. The investors in the long-term bond market will have a more stable environment as the CBF will be able to maintain a certain price level. This will lead to more liquidity and less volatility in the market. This in term will reduce the risk of investing in this market and attract more investors.
The second purpose of the TBFLF is to support the issuance of long-term bonds. The TBFLF was established by the Chinese government to support the issuance of long-term bonds. This is due to the fact that long-term bonds are considered to be risky investments. Thus, the TBFLF was established to provide a stable market for the issuance and trading of long-term bonds.
Thirdly, the TBFLF was also established to provide systematic market monitors for long-term bonds. This means that the TBFLF will monitor the prices of the long-term bonds in China and provide powerful interventions when prices become too volatile. The availability of powerful interventions will increase the stability of the bond market and reduce the risk of investing in this market.
Finally, the TBFLF was established to help Chinese government to better control the debt issuance. As the Central Bank of China is one of the major stakeholders in the market, it will be able to monitor the issuance and trading of the long-term bonds more efficiently. This in turn will improve the transparency of the bond market and help the Chinese government to better manage the issuance of national debt.
Operational mechanism
The operational mechanism of the TBFLF is relatively simple. The TBFLF will use its own capital to buy and sell government bonds in the market. The Fund will buy bonds when their price is lower than the market prices, and sell bonds when their price is higher than the market prices. This will help to reduce the volatility in the bond market.
The Fund also has the power to publish its own bond yield index. The index will give investors an estimate of the yield of the bonds in the market, which will help them to make better decisions on their investments. The TBFLF is also able to give advice to investors in the bond market, which can help them to make better investment decisions.
Conclusion
The Treasury Bond Leveling Fund is an important financial instrument in the Chinese bond market. The Fund was established with the aim of improving the stability of the long-term bond market and provides investors with a better investment environment. The Fund also has the power to monitor the prices of long-term bonds and intervene when they become too volatile. The availability of the Fund has helped to attract more investors in the long-term bond market and thus created a more vibrant market.
