Tax pledge boosts corporate credits

Coupon payout by Wuhan Metro Group pares gains

Tax pledge boosts credit market

(ATF) Chinese corporate and local government bonds climbed for a second day Wednesday after officials signalled they’d rejig local taxes to boost manufacturing.

The benchmark ATF China Bond 50 Index of AAA rated credits climbed 0.02% to 106.63, the steepest advance since last week. The gauge of returns on the most liquid bonds has dropped 0.31% this month on concern that a post-pandemic economic recovery will unleash pent-up demand for consumer goods and stoke a global inflationary spiral.

The gauge has also languished as a result of a clutch of bond coupon payouts, which tend to send prices lower as they reduce the pool of interest payments during the rest of the bond’s lifetime.

Also on ATF

The Corporates sub-index slid 0.09%, the steepest decline in two weeks, after railway operator Wuhan Metro Group paid a coupon obligation on its 4.4% bond due in March 2026.

Bonds were boosted when China’s cabinet said it will provide more favourable tax incentives for research and development in the manufacturing sector.

China will also provide more support for small and micro-sized companies in extending loans, according to a CCTV state-television report.

  • Additional reporting by Reuters

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