China to introduce anonymous bond auctions system

China plans to introduce an anonymous bond auction system to support transactions of high-yield, low-liquidity bonds, two sources with knowledge of the matter said. In a notice confirmed by the sources, the China Foreign Exchange Trade System (CFETS), also known as the National Interbank Funding Center, said that the anonymous bond auction system would apply to bonds with high-yield and low-liquidity characteristics.
Securities covered by the new auction system include but are not limited to defaulted bonds, bonds that have been affected by defaults, and subprime asset-backed securities, the notice said. A Beijing-based trader said the measures are likely aimed at resolving liquidity issues of defaulted bonds and other debts viewed as "junk bonds". In anonymous bond auctions, the buyer does not know the identity of the seller. CFETS did not immediately respond to requests for comment.