China's ultralong-term bonds see a 14% drop new trading halt

 

 China's ultralong-term bonds see a 14% drop    new trading halt



A 14% drop Thursday prompts suspension in Shenzhen, day after strong debut.

SHANGHAI -- The Shenzhen Stock Exchange halted trading briefly on China's new ultralong-term special government bonds Thursday morning for the second day in a row amid strong price movements.

Prices fell 14% Thursday morning from Wednesday's close, prompting the exchange to suspend trading for 30 minutes at 9:30 a.m. local time to encourage consideration of investment risks.

On Wednesday, the first day the 30-year bonds were listed, a rush of buying pushed up prices. The Shenzhen and Shanghai stock exchanges, where the bonds are listed, each suspended trading twice.

The Finance Ministry began issuing the bonds May 17. Chinese government bonds are divided into the interbank market for institutional investors and the Shanghai and Shenzhen exchanges for retail investors. While price movements in the interbank market are relatively stable, the exchange market lacks liquidity and is prone to fluctuations.

Premier Li Qiang announced plans to issue thhe special ultralong-term bonds at China's National People's Congress in March. The money will be spent on national projects and areas related to national security, and will not be included in China's budget deficit.

The country plans to issue 1 trillion yuan ($139 billion) in such bonds this year. It will begin issuing 20-year bonds on Friday and 50-year bonds in June.

Government bonds, which generally offer stable yields, are increasingly popular in China due to concerns about deflation amid the real estate downturn, declining long-term growth expectations and a slump in stock investment.

In a quarterly monetary policy report released on May 10, the People's Bank of China warned against speculative investing in government bonds, saying that excessively short-term investment actions can lead to losses and must be prevented.