Regulators in China plan to ban asset management companies from repackaging local government debt as securitized products, the Wall Street Journal reported. The Asset Management Association of China, overseen by the country’s securities regulator, has proposed draft rules that forbid management firms from using debt owed by local governments or their financing vehicles to back securities. The rules, which included a list of items that cannot be used as underlying assets for asset-backed securities, triggered a selloff in China’s bond market, causing yields to rise sharply as investors dumped lower-graded corporate papers.
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