Corporate bond issuance rules eased

The National Development and Reform Commission (NDRC), the mainland's top economic planning agency, is easing restrictions on corporate bond issues to encourage "high-quality" companies to issue more bonds to support the economy.

Companies could now finance as much as 70 per cent of a project through bond debt, the NDRC said in a statement on its website yesterday.

Previously, the limit for most projects was 60 per cent. Asset-liability ratio requirements for high-rated firms looking to issue new debt, including city investment companies, were also loosened.

The policy change comes as a flood of municipal bond issuance appears to be pushing up bond yields. On sovereign and AAA-rated five-year bonds, yields have risen by close to 20 basis points in the past 10 days, following three debt auctions and announcements by three provinces of coming ones.

Higher corporate bond issuance could boost investment and smooth refinancing for some borrowers, but also risks pushing up yields just as new municipal bonds arrive for auction.

On Tuesday, Chinese five- and 10-year treasury futures for September delivery posted their biggest one-day fall since hitting the market, declining nearly 1 per cent.