China's special treasury bond sales squeeze market liquidity, pushing up borrowing costs

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The issuance of China's special treasury bonds has started to squeeze liquidity in the bond market, pushing up yields on debt issued by other entities such as policy banks and corporates.

China Development Bank (CDB), the largest policy bank in the country, issued a 12.2 billion yuan five-year bonds at a coupon of 3.4005 per cent on Tuesday. The coupon rate was almost 40 basis points higher than the previous day's closing yield on another CDB bond with the same maturity.

Institutions such as CDB are seen as quasi-sovereign . . .

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