China Tightening Curbs on Opaque Local Debt Spurs Market Tumble
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China stepped up efforts to curb the expansion of opaque local-government debt, sparking a tumble in riskier bonds and fueling the stock market’s biggest retreat in five years.
Bonds rated below AAA or sold by issuers graded lower than AA are no longer allowed for use as collateral in short-term loans obtained through repurchase agreements, the nation’s clearing agency for exchanges said yesterday. Notes issued by local government financing vehicles paced losses in lower-rated debt today, while the nation’s benchmark stock index sank 5.4 percent as some investors sold liquid assets as an alternative source of cash.