China Policy Banks Pay Back PBOC at a Record Pace, Turn to Bonds
(See they can still easily play extend and pretend just like us in the property arena and they have to because the entire Chinese economy is built on Real Estate and CCCP infrastructure projects so that ‘ball’ has to keep moving. Bond Yields in this arena are low so the banks that buy them will suffer same issue as the ones in America eventually IF-and that’s a BIG IF-yields rise here but it’s not a direct comparison as they pump out money regardless of making any in return hence the Gov’t is always all over this and like our FRB just keeps the plates spinning as all this debt dropped onto it should drive yields higher-that’s what they are trying to do)
As the Chinese bond market undergoes a powerful rally, the nation’s so-called policy banks are turning away from the People’s Bank of China as a source of funding and rushing to raise debt instead. China Development Bank and its two fellow policy-oriented lenders repaid a net 343 billion yuan ($48 billion) of funds under the People’s Bank of China’s Pledged Supplemental Lending program in April. That’s the largest repayment since data began in 2015, the latest official figures showed. By contrast, bond sales by the trio of lenders hit 364.7 billion yuan last month,the highest level for the period in nearly two decades, according to GF Securities Co.
For policymakers, the shift in funding has mixed consequences. PSL lending is mainly dedicated toward infrastructure and real estate projects, so CDB and its counterparts may have more freedom in deploying the cash raised from bonds. But, by stepping up supply in the bond market, the policy banks could aid efforts by regulators to stem a rally that’s spurred concerns. (Their ‘regulators’ just rubber stamp it). Yields on a number of instruments have tumbled to record lows, undermining demand for China’s currency as rates stay relatively high in the US and other markets. (see Japan) Officials have ramped up scrutiny of trading behavior, and warned some banks to limit their exposure to bonds amid financial-stability worries. The policy banks are key state-owned lenders that extend credit mainly based on government priorities rather than the pursuit of profit.
Yields on five-year bonds issued by China Development Bank have declined to 2.15%, below the 2.25% interest rate on PSL loans — illustrating the relative appeal for funding in the market.
https://www.bloomberg.com/news/articles/2024-05-08/china-policy-banks-pay-back-pboc-at-a-record-pace-turn-to-bonds