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China Asks Banks to Report on Liquidity After Bond Slump

  • Short-term debt falls as investors shift toward stocks
  • China has eased Covid restrictions, rolled out property rescue
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Chinese regulators asked banks to report on their ability to meet short-term obligations after a rapid selloff in bonds triggered a flood of investor withdrawals from fixed-income products, according to people familiar with the matter.

The unscheduled regulatory queries coincided with the biggest decline in China’s short-term government bonds since mid-2020. The slump -- spurred by a shift toward riskier assets including stocks -- prompted retail investors to pull money from wealth-management products, fueling a spiral of price declines and accelerating withdrawals. Losses also spread to top-rated corporate bonds, stoking a record surge in yields this week.