The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
The Outreach and Education function engages, empowers and educates the Second District communities that the Bank serves, especially civic leaders, students, educators, small business owners, policymakers and the general public. It furthers the Bank's commitment to the region by listening to the communities we serve and leveraging our unique attributes to positively impact school and university programs, as well as analysis and research.
Although China now has one of the largest government bond markets in the world, the market has received relatively little attention and analysis. We describe the history and structure of the market and assess its functioning. We find that trading in individual bonds was historically sparse but has increased markedly in recent years. We find also that certain announcements of macroeconomic news, such as China’s producer price index (PPI) and manufacturing purchasing managers’ index (PMI), have significant effects on yields, even when such yields are measured at a daily level. Despite the increased activity in the market, we are able to reject the null hypothesis of market efficiency under two different tests for four of the most actively traded bonds.