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Sinoma issued bonds without bank guarantee

(Xinhua)
Updated: 2008-04-09 13:36

Analyst Qin Juan of Chang Xin Asset Management said bank guarantees would gradually make way to credit ratings in the future as the new instrument clarified that companies may issue debenture bonds, mortgage bonds and third party guaranteed bonds.

As the current market still favored bonds with bank guarantees, analysts expected the interest rate spread between corporate and government bonds with the same term of maturity to expand in future.

Statistics showed such a spread widened from 0.64 percent to 1.76 percent early last year to 0.95 percent to 2.33 percent in December because of the ripple effect of the US subprime mortgage crisis.

Director Xu Lin with NDRC's Fiscal and Financial Department maintained interest rates should serve as a much more significant leverage in corporate bond issuance while the pricing role of intermediaries, especially credit rating agents, should be strengthened.

"Interest rates should mirror the quality and risks of corporate bonds. The additional bank guarantees however have resulted in almost unanimous credit ratings and put a premium on the bond issuance by enterprises with average financial standing," he said.

The official told the media in early March that the year's new corporate bond supply would expand no less than 55 percent from last year's 101.5 billion yuan to somewhere close to 160 billion yuan.

Yan Yan, China Chengxin Securities Rating deputy board director, predicted more companies would choose direct financing such as corporate bonds this year to cope with succinct bank loans amid tight monetary policy.

He also foresaw progress this year in the opening up of domestic bond market to multinationals and overseas financial institutions and foreign governments. Only a few multinationals and foreign governments might be brought in at the early stage, with their maximum issuance scale at 30 billion yuan, he said.

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