China’s policy shift toward economic stimulus has spurred a comeback in leveraged bond investments, just two years after authorities kicked off a campaign to curb excess borrowing.
Bond traders have taken the slew of credit-boosting measures unveiled in the past week as a green light to borrow, as seen in a jump in repurchase agreements to a record high. That’s in turn helping to pull down yields in the credit market, amplifying the impact of authorities’ moves.
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“What has become certain is monetary policy won’t tighten” with the economy under pressure, said Shen Bifan, chief strategist at Shenzhen Spruces Capital Management Co. “Credit-easing policies also convinced the market it’s bargain-hunting time for at least some corporate bonds, after a very bad first half.”