Bloomberg: China Bonds Drop as Government Said to Expand Debt-Swap Program
The allocations will be raised to 4 trillion yuan ($628 billion) for this year, pending approval from the State Council, people familiar with the matter said on Wednesday. The program aims to help regional authorities by exchanging high-cost bonds for cheaper municipal debt.Local governments are feeling the squeeze.
“The biggest negative of the debt swap is the increase in bond supply that could trigger yields to go higher, especially in the mid- to long-end," Guotai Junan Securities Co. analysts led by Xu Hanfei wrote in a note. "We can’t rule out that the central bank will cut interest rates and reserve ratios to provide support."
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