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China’s Bond Market Mayhem Pressures Regulator to Address Issue

(Bloomberg) -- China’s banking regulator is under pressure to minimize the impact of the sudden suspension of commonly used bond price feeds, which shocked investors and sent volumes plunging in the world’s second-largest debt market.

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Officials told some market makers to provide stability by maintaining trading volumes, narrowing bid-ask spreads and supplying quotes of corporate bonds as much as possible, Caixin reported late Wednesday, without saying where it got the information.

Transactions plunged by 30% to 60% on Wednesday from the previous day, according to broker estimates, after fixed-income brokers stopped supplying aggregated bond quotes to data vendors long relied on by traders.

There has been no official comment on the reason for the information halt, considered by traders to be essential to the functioning of the 145 trillion yuan ($21 trillion) market. Reuters reported the move was ordered by China Banking and Insurance Regulatory Commission to address data security concerns.

“We are going backwards in terms of trading efficiency because this will lower secondary transaction volume for sure,” said Zerlina Zeng, a senior China credit analyst at CreditSights Inc. in Singapore. “This definitely will spark more concerns on the transparency of China’s regulation.”

The issue of pricing is especially acute in China, which has a predominantly over-the-counter market where identifying counterparties and accessing quotes have long been headaches for traders. In the absence of data feeds, traders turned to chatrooms available on Tencent’s QQ and WeChat to share prices and do deals, a method that’s against regulations in many parts of the world.

Global Concern

The tumult comes as the country makes up a growing portion of global fixed-income portfolios. China has been seeking to make its financial markets more efficient and transparent to attract much-needed foreign capital, yet unexpected regulatory interventions have deterred investors.

CBIRC told brokers including the joint ventures of Tullett Prebon and NEX International Ltd. to stop providing their bond feeds to outside parties due to data security concerns, Reuters reported on Tuesday, citing people familiar with the matter.

Brokers fell under scrutiny because their licensed operations don’t include data feed services, Caixin reported, citing a person familiar with the matter.

Official silence over the issue is adding to unease in the market, especially given the increasing encroachment by the state over sectors dominated by private enterprise. The most popular data vendors such as Qeubee and Dealing Matrix are privately-run firms that emerged about a decade ago to fill demand for real-time price quotes from brokers.

“If the regulator later comes up with their own for-profit quotation terminal or becomes controlling shareholders of these suppliers. it will be more than a transparency issue or communication issue,” Zeng said.


A rival system run by central bank affiliate was still offering live prices from two brokers on Wednesday, according to traders. Unlike its privately-run competitors, the service provided by China Foreign Exchange Trade System (CFETS) doesn’t charge a fee, according to three users, although the system is considered hard to use and less comprehensive.

Bloomberg LP, the parent company of Bloomberg News, also offers fixed-income trading, data and information to the financial services industry.

The latest move comes against a backdrop of dramatic interventions by Beijing in the country’s financial markets that have undermined confidence overseas. The disappearance of a high-profile investment banker last month added to doubts about whether President Xi Jinping’s crackdown on private enterprise such as tech and property has run its course.

Foreign funds have turned negative on the nation’s assets after a brief rebound sparked by the country’s U-turn on Covid Zero. The MSCI China Index of stocks is down 15% from this year’s high, while overseas holdings of Chinese debt in the interbank market fell to the lowest since 2020 in January. International funds sold a record amount of Chinese bonds in 2022.

--With assistance from Qingqi She and Wenjin Lv.

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