China repo volume up on policy change

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.

“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.”

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