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China Bond-Selloff Fears Grow as Liquidity Begins to Tighten

  • Local government debt issuance is set to double this week
  • Interbank overnight repo rate reached highest since February
Updated on

China’s sovereign bonds have defied expectations for a selloff all year but their day of reckoning may be getting closer.

The amount of cash in the banking system has been shrinking, while local government debt sales are set to double this week, hoovering up more funds. As a result, the overnight interbank interest rate rose to the highest level since February on Monday.