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China's Central Bank Lowers Borrowing Costs to Help Clean Up Local Debt Mess

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China’s government needed lower borrowing costs to clean up a local debt mess. The central bank obliged.

The three-month Shanghai Interbank Offered Rate has tumbled 200 basis points since March 31, heading for the biggest two-month drop since 2008. That coincides with the government kicking off a municipal bond program and the exchange of regional loans into lower-yielding notes. Jiangsu province and Xinjiang autonomous region both sold three-year debt for less than 3 percent last week, almost matching the sovereign, after the start of issuance was delayed in April.