First Time In Four Years: Liaoning Bond Auction Undersubscribed, Yields Rise 15%

Economic Times: China's municipal bond market shows signs of stress after auction undersubscribed
China's fledgling municipal bond market is showing increasing signs of stress after a provincial bond market auction went undersubscribed for the first time in four years.

One auction of 10-year bonds by the northeastern province of Liaoning failed to sell out on Friday and yields on other auctions by the province rose by between 20 and 29 basis points from an auction by the Xinjiang ethnic autonomous region on Thursday.
Only a few days ago I posted China Northeast in Recession, Unadjusted Nominal GDP Declines; Global Economy on Knife's Edge, which discussed how Liaoning and other northeast provinces have seen their nominal GDP decline.

Chinese coverage from iFeng: 中国地方债四年来首现流标 辽宁不受债市“待见”

¥550 million 10-year special project bonds were offered, but only ¥400 million were purchased.

Shenyin Wanguo analyst Chen Kang said although local debt offerings are increasing, the banks ability to support them is declining. He went on to say that unless the central bank directly intervenes in this market, simply adding liquidity won't solve the problem because banks have more "power to speak" thanks to economic reforms. They don't want to hold these bonds, so they don't.

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