China central bank sets up facility to back bond market stability
China's central bank has set up the Bond Market NBFI Swap Facility to support liquidity at asset managers and fund firms during market stress, allowing them to borrow central bank bills and buy eligible bonds or fund units.
China's central bank said on Monday that it had decided to set up the Bond Market NBFI Swap Facility, or BNSF, to maintain bond market stability, according to a report by The Standard.
Under circumstances such as when asset managers face collective liquidity risk or the bond market is under systemic stress, the facility will support certain bank wealth management subsidiaries and public fund managers, as well as their parent firms, in borrowing central bank bills to raise financing.
The institutions can then use the cash to buy eligible bonds or units from their own mutual fund products facing redemptions, then pledge those assets to the central bank.