China corporate debt yields hit by collateral rule

Clearing house disqualifies higher-risk issues from being used for bond repurchase agreements


YIELDS on benchmark China Development Bank bonds ended a few basis points lower on Tuesday, having risen by 30 basis points at the opening, after investors were alarmed by new corporate bond-market restrictions announced late on Monday.

The China Securities Depository and Clearing Corp (CSDC) surprised traders when it clamped down on the corporate bond market, tightening rules to disqualify higher-risk bonds from being used as collateral for bond repurchase agreements.

The CSDC said that, with immediate effect, corporate bonds with a AAA credit rating and corporate bonds issued by firms with a rating of AA or above could be used.

Analysts estimated that the change would exclude some 500...

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