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China Banks Seen Selling Down  Government Bond Holdings

CHINA RATES
  • Chinese banks were seen selling their government bond holdings according to traders (per BBG).
  • As bond yields hit recent lows, this is opportunistic as banks seek to free up capital to support lending activity.
  • Previously authorities had tried to stem the move lower in yield, believing it was not reflecting the health of the domestic economy.
  • However, ultimately this provided an opportunity for banks (who sit on significant holdings of government bonds) to sell at lower yields.
  • This represents an insight into the regional banks and how much more advanced they have become in financial markets engagement and capital management and is a positive sign.

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