The "New Normal" Of The Bond Market Urgently Needs To Improve The Disposal Mechanism Of Default Bonds.

Since the default in the bond market in 2014, credit default in 2018 and 2019 has become more frequent and frequent.

In fact, the frequent occurrence of credit default is a "new normal" in the current bond market. It is also a prominent challenge facing the bond market at present. The key to deal with challenges is how to properly handle the follow-up issues of default bonds.

For the market, breach of contract promotes market clearing, and is also a healthy promotion of market development. But in this process, the disposal mode of defaulted bonds in the past market did not really achieve the purpose of releasing credit risk in more cases.

For example, the more common local government led the debt disposal after breach of contract, which provided the government with a "bottom up" to give the enterprises certain room for slow-release, but at the same time, it may also lead to a further risk outbreak after accumulating.

At the same time, after more intense defaults, the disposal of defaulted bonds is lagging behind, and market risk preferences are further depressed. The polarization of the market also brings negative feedback to the slow release of credit default.

But we also see that the disposal of default bonds has become the focus of regulators.

Not long ago, the Supreme People's court and the NDRC, the central bank and the SFC jointly organized the national court "trial Forum on bond dispute cases", followed by the central bank, the NDRC and the SFC jointly drafted the notice on the issue of the breach of the company's credit related bonds (Draft).

The main contents include the four principles of dealing with the default of a bond, namely, giving full play to the core role of the trustee and bondholders conference system in dealing with the default of the bonds; making clear the responsibilities and obligations of the parties involved in the breach of contract; enriching the disposal methods of the marketable default bonds; and increasing the crackdown on the issuers' Evasion of debts.

The key problem is to strengthen the disposal of defaulted bonds, which is marketization and rule by law, improve the disposal efficiency, defuse the stock risk, and accelerate the improvement of the mechanism of dealing with the default of bonds.

For specific disposal methods, the relevant documents also point out that the issuers are allowed to negotiate debt restructuring under the premise of equality and voluntariness through bond replacement and extension. At the same time, in terms of investor protection, we also put forward requirements for the authenticity and integrity of information disclosure.

Starting from the system, the current disposal of bond default has begun to a good start. In the future practice, we still need to further improve the market mechanism and promote the sound development of the bond market.