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China proposes tighter bond markets leverage rules rules after defaults

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Hong Kong - China has proposed measures to tighten leverage rules in the onshore bond market, highlighting concern that investors’ borrowings are overextended after a series of defaults.

The China Securities Depository and Clearing Corporation said a note investor’s outstanding repurchase contracts shouldn’t exceed 70% of debt holdings in the person’s account, according to one of two statements posted on the clearing house’s website on Friday.

If an investor uses a security rated AA or AA+ as collateral, the amount shouldn’t be more than 10% of the bond’s total issuance, said the statement. The CSDC is seeking public opinions on the proposed regulations, it said.

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