Banks urged to act on sell-off

China asked some of its biggest banks to help stabilize the domestic bond market after a wave of fund redemptions by retail investors fueled the biggest credit selloff since 2015, sources said.

Regulators asked lenders to buy bonds via their proprietary trading desks. The goal was to absorb the selling pressure caused by retail withdrawals from some of those same banks' wealth management products, they said.

Yield premiums on three-year AAA-rated corporate bonds have climbed to the highest level since August 2020, and the spread has widened 35 basis points so far this month, heading for the biggest monthly jump since March 2015, Bloomberg data shows.

That has prompted firms, including many local government financing vehicles, to pull a cumulative 84 billion yuan (HK$93.95 billion) of planned bond sales since the start of November.

In addition, Chinese leaders are planning to proceed with a closely watched economic policy meeting in Beijing this week, opting not to postpone the gathering as Covid infections surge across the capital, sources say.

The Central Economic Work Conference is set to start today. Held every December, senior officials use the event to plot out economic policy for the coming year.

Bloomberg