Tags: Higher | Yields | China | Corporate | Bond | Market

WSJ: Higher Yields Hurt China's Corporate Bond Market

WSJ: Higher Yields Hurt China's Corporate Bond Market
(DreamsTime)

By    |   Wednesday, 12 April 2017 01:35 PM

China’s central-bank moves to stabilize the yuan and curb financial risks reportedly have made bond issues more expensive for companies.

The People’s Bank of China, the country’s central bank, has twice raised a suite of short-term interest rates since late January to steady the yuan and rein in financial risks. The moves have sent borrowing rates between banks soaring, The Wall Street Journal reported.

"Banks, the biggest holders of Chinese bonds, are now increasingly selling down their bondholdings to boost liquidity. That has pushed up yields in the market, which makes bond issuance more expensive for companies," the Journal reported.

Meanwhile, China’s bond issuers, faced with 9.7 trillion yuan ($1.4 trillion) of maturing debt this year, are stepping on the gas, Bloomberg reported.

Companies and governments sold 1.3 trillion yuan of onshore notes in March, about as much as in the first two months of the year combined, according to data compiled by Bloomberg that excludes certificates of deposit.

Fitch Ratings expects refinancing needs to drive issuance in the coming months, with corporate debt sales for the year forecast to match or even exceed last year’s total. Chinese companies issued a record 9.8 trillion yuan of bonds in 2016.

The wall of maturities gives Chinese issuers little choice but to wade into a market where the benchmark 10-year yield is near the highest in more than a year after the  worst quarterly performance in at least 12 years. A Bloomberg survey last month showed that yields and money-market rates will climb further and credit premiums will widen as the central bank guides borrowing costs higher.

(Newsmax wires services contributed to this report).

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The People’s Bank of China, the country’s central bank, has twice raised a suite of short-term interest rates since late January to steady the yuan and rein in financial risks. The moves have sent borrowing rates between banks soaring, The Wall Street Journal reported.
Higher, Yields, China, Corporate, Bond, Market
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Wednesday, 12 April 2017 01:35 PM
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