China Foreign Exchange Trading Center: The total trading volume in the currency market in January was 11.49 trillion yuan, a decrease of 34% compared to the previous month.

On February 25th, the China Foreign Exchange Trading Center released the January 2025 report on the operation of the interbank RMB market. In January 2025, the average daily trading volume and balance in the currency market decreased significantly, with main repurchase rates rising, reduced net lending by large banks, and increased net lending by money market funds. Primary bond issuances increased month-on-month, trading in government and policy bank bonds was active, the yield curve was short-term up and long-term down, and most credit spreads narrowed. The interest rate swap curve moved up overall, with transaction volume increasing compared to the previous month. The total trading volume in the currency market in January was 11.49 trillion yuan (a decrease of 34% compared to the previous month), with an average daily trading volume of 600 billion yuan (a decrease of 24% compared to the previous month). Summary: In January 2025, the average daily trading volume and balance in the currency market decreased significantly, with main repo rates rising, reduced net lending by large banks, and increased net lending by money market funds. Primary bond issuances increased month-on-month, trading in government and policy bank bonds was active, the yield curve was short-term up and long-term down, and most credit spreads narrowed. The interest rate swap curve moved up overall, with transaction volume increasing compared to the previous month.The maturity of MLF affects the convergence of funds, with short-term performance continuing to be weak while fundamental data performs well and long-term rates see a slight increase; at the end of the month, the central bank resumed 14-day reverse repurchase agreements but funds remained tight, expectations of reserve requirement ratio cuts and interest rate cuts fell short, suppressing bullish sentiment in the bond market. Trump officially took office and announced tariffs on China, while medium and long-term funds entering the market boosted risk appetite, leading to narrow fluctuations in long-term bond yields.At the end of this month, the yields on government bonds with maturities of 1, 3, 5, 7, 10, and 30 years were 1.3%, 1.31%, 1.41%, 1.55%, 1.63%, and 1.87%, respectively. They increased by 22, 12, remained the same, decreased by 4, 5, and 4 basis points compared to the end of last month. This month, the lowest and highest values of the 10-year government bond curve were 1.5966% and 1.6747% respectively, with a fluctuation range of about 8 basis points, a decrease of 24 basis points compared to the previous month. The yield spread between 1-year and 10-year government bonds was 33 basis points (in the 2nd percentile since 2020), a decrease of 27 basis points compared to the previous month. Credit bond yields saw short-term increases and long-term decreases, with most credit spreads and rating spreads narrowing. Thirdly, the interest rate swap curve moved upwards overall, with an increase in trading volume month-on-month. In January, the interest rate swap curve moved upwards overall. The prices of 6-month, 1-year, and 5-year SHIBOR 3M swaps were 1.665%, 1.54%, and 1.4288% respectively, increasing by 9, 10, and 1 basis points compared to the end of the previous month. The prices of 1-year, 5-year, and 10-year FR007 swaps were 1.6323%, 1.4923%, and 1.57% respectively, increasing by 17, 6, and decreasing by 3 basis points compared to the end of the previous month. The daily average trading volume of interest rate swaps increased. In January, a total of 31,000 transactions were made in RMB interest rate swaps, with a daily average increase of 14.0%; the total nominal value was 34 trillion yuan, with a daily average trading volume of 1781.81 billion yuan, an increase of 8.3% month-on-month. The daily average trading volume of forward bond transactions decreased, while the daily average trading volume of interest rate options increased. In January, there were 718 transactions of standard bond forwards, with a total nominal value of 130.9 billion yuan, a decrease of 36.4% compared to the previous month. There were 75 transactions of RMB interest rate options with a total nominal value of 190.7 billion yuan, all of which were rate cap/floor options. This article is selected from the "China Money Market" WeChat public account, authored by the Market Department of the China Foreign Exchange Trading Center; the full text of the report on the operation of the interbank RMB market in January 2025 will be published in the February 2025 issue of "China Money Market" magazine, hosted by the China Foreign Exchange Trading Center; GMTEight Editor: Chen Wenfang.