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How the PBoC´s new MLF affects the yield curve

Author

Listed:
  • Makram El-Shagi

    (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan)

  • Lunan Jiang

    (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan)

Abstract

In this paper, we assess the impact of the Medium-term Lending Facility (MLF), an instrument recently introduced by the People's Bank of China (PBoC), on treasury and corporate bond yields. This instrument and, more specifically, the transmission of its use through treasury bond yields to corporate bond yields plays a major role in the more market-based policy the PBoC envisions for the future. Using a semi-parametric local projection framework, we show that the mechanism is already fairly effective, allowing the PBoC to manipulate the entire yield curve.

Suggested Citation

  • Makram El-Shagi & Lunan Jiang, 2023. "How the PBoC´s new MLF affects the yield curve," CFDS Discussion Paper Series 2023/1, Center for Financial Development and Stability at Henan University, Kaifeng, Henan, China.
    • Handle: RePEc:fds:dpaper:202301
    as

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    File URL: http://cfds.henuecon.education/images/dpaper/WP_1_2023_PBoC-yieldcurve.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Monetary policy; yield curves; MLF; Chinese bond market;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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