From the FT on Friday, but some scary reading for the start of the week …. : China bond auction failure reinforces slowdown concerns
- The Chinese government was unable to sell all the bonds offered at an auction on Friday, its first such failure in nearly a year
- Traders said there was strong appetite for the government bond but only at rates above what the finance ministry was willing to pay to borrow money
- The finance ministry had hoped to sell Rmb28bn ($4.5bn) of one-year bonds. However, it ended up selling just Rmb20.7bn, the first time since June that a government debt sale failed to reach its target.
- with market rates climbing in recent weeks and traders expecting the tightening to continue, banks demanded a higher yield from the finance ministry.
- “Rates have to stay relatively high to force deleveraging. Yields should be higher,” said a trader with a bank in Shanghai. “Everyone is suffering from the deleveraging process, even the finance ministry.”