New rules issued for buyers of govt debt

Investors are taking a new look at the government debt market amid signs that regulators are moving to close off funding avenues for opaque local government financing vehicles and promote a more transparent municipal bond market.

The China Securities Depository and Clearing Corporation, the nation's clearing agency for exchanges, said on Monday it will not allow bonds rated below AAA to be sold by issuers graded lower than AA, or to be used as collateral for short-term loans obtained through repurchase agreements.

The ruling sparked a retreat from lower-rated bonds and contributed to shares in Shanghai tumbling as note holders reassessed the appeal of owning such debt.