China's 2015 bond issuance surges 88% to S$4.85 trillion

SHANGHAI (REUTERS) - China's total bond issuance jumped to 22.3 trillion yuan (S$4.85 trillion) in 2015, up 87.5 per cent from the previous year, official figures, driven by a new debt-swap programme introduced last year and strong corporate issuance.

Local governments issued 3.8 trillion yuan of municipal bonds, while policy banks issued 2.6 trillion yuan of bonds, according to data released late on Monday (Jan 25) by the People's Bank of China on its website.

Issuance in the larger interbank market was 21 trillion yuan, up 81.3 per cent on the year, with the remainder issued through the smaller exchange traded markets.

A main factor driving the increase was China's massive new local government debt swap programme, initiated in March 2015, to help indebted municipal and provincial governments refinance expensive debt.

Of the municipal debt issued in 2015, 3.2 trillion yuan was issued under the swap programme, with the remainder being the additional ordinary and special programme debt previously approved by the central government.

Corporate debt issuance also expanded rapidly in 2015 as firms took advantage of easier issuance rules and lower onshore rates, despite increasing numbers of bond defaults, primarily in heavy industrial sectors like steel and chemicals.

The rapid issuance has raised concerns among some analysts that credit quality in some portions of the corporate bond market is deteriorating, although high-rated corporate bond prices remain at or near multi-year highs.