China secondary bond market:

Offshore trading volume up 15% month-on-month

Offshore trading volumes up by 15% month-on-month

• Based on MiFID and Trace data, China offshore bonds' total trading volume was $7.8 billion in August, more than $6.8 billion in July. Real estate issuers like Country Garden and Kaisa Group were the most actively traded.
• TAGG <GO> provides a display of aggregated post-trade volumes for fixed-income securities, to show market direction and liquidity.

Offshore trading volume of China issuers

Source: Bloomberg TAGG <GO>; TRACE and MIFID data

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Yield dropped on ample interbank liquidity
Domestic bond yield to maturity dropped in August on the back of the PBOC's 1-year medium-term lending facility (MLF) rate cut and the expectation that the central bank would continue to keep interbank liquidity ample due to the economic slowdown. The domestic bond universe's average yield to maturity for fixed-rate medium-term notes dropped 4.9 basis points on average for all rating buckets and sectors. By China's local rating buckets, AAA dropped 0.7 bps, AA 7.1 bps, and non-rated bonds 7.6 bps. By sector, energy dropped 10.3 bps while real estate rose 14.2 bps. Chengtou issuer spreads dropped 5.9 bps. The lower average yield across most sectors should alleviate refinance risk for corporates, especially for non-rated issuers, and surpass the rising default rate.

Use FIW@CN to see the yield change based on local ratings and issuers of China's domestic bonds by sector.

China domestic bonds yield to maturity by sector

Source: FIW@CN <GO>, Bloomberg Intelligence