Bond Financing by Chinese Firms Hits Highest Level in 19 Months

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Companies in China have resumed debt issuance with a vengeance following a robust rally in the bond market.

Chinese companies issued new bonds worth a total of 872.8 billion yuan (approx. USD$139billion) in March, for the highest level in two years.

This translates into net financing on the 25.7 billion yuan Chinese corporate bond market of 329 billion yuan last month, or the highest level since the previous peak of 359.3 billion yuan in August 2016.

The recovery in corporate issuance arrives following a strong rally in the Chinese bond market, with the yield on benchmark 10-year government bond now at 3.66%, its lowest level since October.

China’s bond market took a battering in 2017, as Beijing forged ahead with its deleveraging campaign and sought to cull the vast amount debt amassed since the Great Financial Crisis.

The cost of borrowing via the bond market hit a three-year high, with yields on 10-year government bonds peaking at 4% in mid-November, while corporate debt-raising dropped to a decade-long low.

Faltering stocks alongside PBOC’s efforts to keep the Chinese economy humming with ample liquidity have helped the bond market to recover and driven borrowing costs down.

The volume of new corporate bonds either delayed or withdrawn has fallen to 122.9 billion yuan since the start of 2018, as compared to 132.5 billion yuan a year previously.

 

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