China Bond Market Surges After Restrictions Are Announced

China Development Bank bond yields rose nearly 30 basis points at market open on Tuesday, traders said, as the market reacted to new corporate bond market restrictions announced on Monday afternoon.

The benchmark government bond future contract also reacted, sliding over 1 percent in morning trade.

China’s official bond clearing house surprised traders when it clamped down on the corporate bond market on Monday, excluding about 500 billion yuan ($81 billion) worth of corporate bonds from being used for bond repurchase agreements.

The move follows other measures to crack down on fixed income trade, in particular higher-risk debt issued by low-quality issuers, and is likely to further spur the migration of capital out of fixed income into Chinese stock markets, which have exploded in recent months as money as moved from real estate and wealth management products into shares.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza