Who's Gonna Buy 1 Trillion in Infrastructure Bonds

Last month: Spray and Pray: Work Round the Clock to Issue Local Govt Debt, 1 Trillion in 4 Months and shortly thereafter Spray and Pray Faster: 1 Trillion Yuan Infrastructure Bonds in August

Latest headline.

Caixin: China Scraps Limit on Banks’ Local Government Bond Purchases
Banks that underwrite local government bond sales will no longer face restrictions on the amount of the debt they can buy themselves, the latest move by policy makers to help cash-strapped authorities raise funds for infrastructure investment to support flagging economic growth.

Lenders were previously only allowed to buy up to 20% of any local government bonds issued arranged by their underwriting departments, a ceiling imposed in 2012 out of concern that the trading and investment arms of banks were mopping up unwanted bonds to ensure the success of the sale, but at the same time exposing their balance sheets to additional risk.

But the China Banking and Insurance Regulatory Commission (CBIRC) has now scrapped the 20% ceiling, according to a circular released on Monday that was seen by Caixin. Banks will now be able to buy up any portion of a bond sale that has not been fully subscribed, reducing the risk that local governments will fail to get all the money they want to raise. The move is being seen as another effort to spur banks to buy more local government bonds as a deluge of issuances is set to hit the market after the Ministry of Finance last month ordered officials to speed up sales.

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