Chinese bond auction falls short

[Sainttjames]

http://news.bbc.co.uk/2/hi/business/8139902.stm

Chinese bond auction falls short


China's looks poised to tighten monetary and credit policies
China's finance ministry has failed to sell all 28bn yuan ($4.1bn; £2.55bn) of one-year government bonds it offered at an auction.
It is the first under-subscribed government bond auction since 2003.
The ministry sold a total of 27.52 billion yuan of the bonds, which offered a yield to investors of 1.06%.

[Slimprofits]

Re: Chinese bond auction falls short

The outcome is what the Chinese wanted?

The auction result came in only slightly above Tuesday's indicative secondary market yield of 1.0091 percent bid for one-year government bonds, according to Reuters Reference Rates.

But several traders said the ministry had discarded bids with yields above 1.18 percent in order to obtain a fairly low auction result, but leaving the issue undersold.

In response to the poor auction, the secondary market yield surged to a two-month high of 1.0518 percent on Wednesday, its biggest daily rise since July 2006.

Traders said the bonds attracted weak demand after signs in the central bank's money operations in the past week suggested the bank may be starting to exit its loose monetary policy stance to avoid the risk of inflation as economic growth recovers.

The central bank let the rates on its short-term repos rise in its open market operations for a second straight week on Tuesday, after holding them flat in the first half of this year.

"The ministry may not want the auction yield to come in too high, but secondary market yields immediately jumped a bit after the failed auction. The market still believes yields will keep moving to higher ranges," said a trader at a U.S. bank in Shanghai.

http://news.alibaba.com/article/deta...ibed-govt.html