Two sources revealed Thursday that the People's Bank of China has called on some commercial banks to comprehensively promote the issuance of corporate bonds with the supporting credit risk mitigation tool (CRM) in the near future, and that the CRM part with the bonds should be undertaken proportionally through consultation between the main underwriter and the China Bond Credit Promotion Corporation.
A source said that the central bank's move is intended to implement a series of recent policies to support private enterprises in issuing bonds. "What is required is to cooperate with China's credit increase (creation). That's all for the proportions themselves."
In support of these initiatives, the Interbank Market Traders Association may recently lower the threshold for entry to core traders in order to allow more banks to join, the person said.
Another source also pointed out that this is a powerful way to promote leniency, just as the central bank gave some banks additional MLF (medium-term lending facilities) funds to support credit bond investment.
The central bank has not yet responded to Reuters's fax seeking comment.
Traders at a bank in East China said that the domestic economy was also declining in the context of the trade war. The above requirements met the general direction of recent leniency in support of real enterprises and had a positive impact on credit.
"It is helpful for the convergence of credit spreads, good for credit bonds, and may have a marginal impact on interest rates." He said.
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