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  • Stand easy or easier at least.

  • 10 basis points might not be the biggest one day change ever for borrowing cost in China's vast 7-trillion bond market,

  • but it was enough on Monday to push the country's closely watched onshore repo rate back from Friday's 8-month high.

  • That gives investors a little breathing space to consider what next for the rising tensions and onshore bond markets.

  • One thing they should consider is their own leverage as well as their fears for companies.

  • Bond yields in China had been rising rapidly.

  • This month China's 5-year government bond yield has risen 25 basis points at 2.75%, its worse monthly performance in a year.

  • Defaults by two state-owned groups have also raised fears that others will also follow suit.

  • All this is added roughly half a percentage point this month alone for high quality corporate borrowers and spooked by this,

  • companies have so far suspended plans for an estimated 10 billion in expected bond issuance.

  • And middle of the furore about the pain of rising rates,

  • one so far overlooked factor is that investors as well as companies appear precariously balanced.

  • The market for pledge-style repos, which are short-term bond backed loans, is currently bigger than the actual stock of outstanding debt.

  • Sharp worsening in market sentiment could force those borrowers into fire sales if their loans are called or cannot even just be rolled over.

  • And the bond fund inflows that followed last summer's stock market rout are also at risk of reversing.

  • Since China's bond markets are not quite as liquid as their size might suggest,

  • firm managers facing redemptions could be forced to dump what they can rather than what they should or would like to sell.

  • This potential for a market rout makes the 7-day repo rate more important than ever.

  • Long considered a gauge of official views on the health of the bond market,

  • the rate reached 2.55% on Friday before dropping to 2.45% on Monday.

  • So long as the PBOC, the People's Bank of China, injected enough money to keep the rate roughly in this range between 2.25 and 2.5%,

  • the worst sell off fears should be kept at bay.

  • But if it moves and stays sharply higher, leveraged investors would be in for a shock,

  • And given the impact that any Chinese turmoil now seems to have on world markets, that means investors elsewhere, too.

Stand easy or easier at least.

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B1 中級

中国債券市場の動向|ショートビュー (China's bond market on edge | Short View)

  • 30 6
    Kristi Yang に公開 2021 年 01 月 14 日
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