The People's Bank of China, in a step to further liberalize China's financial markets, last week published rules allowing Yuan interest rate swaps. The reference rates for interest rate swaps would be based on benchmark inter-bank bond market rates and the one-year bank deposit rate. PBOC said that the move is an inevitable step in the process of speeding up market-oriented interest rate reforms and will meet demand from investors in the inter-bank debt market. Meanwhile, China's official Securities Journal reported that PBOC would set up a mechanism to periodically adjust its rediscount rate. The rediscount rate has been fixed at 3.24% since March 2004. PBOC has already granted permission allowing commercial banks to trade Yuan currency forwards and swaps.