* Liquidity support worth several billion yuan
* Funds provided via bond repurchase agreements
* China 10-year debt futures for March surge around 1.3
(Adds more details, background)
SHANGHAI, Dec 21 At least one Chinese state
lender provided liquidity support worth several billion yuan to
fund management firms via short-term lending tools on Wednesday,
two sources with knowledge of the matter said.
The sources, who declined to be named because of the
sensitivity of the issue, told Reuters the lender injected the
funds via bond repurchase agreements, in a move that signals
easier access to funding by non-bank financial institutions such
as fund houses and brokerages.
The injection, which comes on the same day Sealand
Securities Co promised to honour a problematic bond
transaction agreement, in effect avoiding default in a
high-profile bond scandal, helped ease fears of a liquidity
squeeze in the financial system and boosted bond prices.
Zhou Hao, economist at Commerzbank, said China's market
liquidity conditions improved somewhat as Sealand Securities
avoided defaults with its counter-parties, but cautioned that
"the risk of bond deleveraging won't disappear immediately."
China's 10-year treasury futures for March delivery
surged around 1.3 percent in late afternoon trade, rebounding
from a record intraday low touched on Tuesday.
Counterparty risks between banks and other types of
financial institutions including fund houses, brokerages and
trust firms, spiked after media reports last week that Sealand
Securities defaulted on a bond agreement with Bank of Langfang.
Sealand Securities, which had previously denied such an
agreement, said on Wednesday it would accept the responsibility
for "forged bond agreements." It had earlier said its company
seal had been forged by two former employees.
($1 = 6.9507 Chinese yuan)
(Reporting by Shanghai Newsroom; Editing by Jacqueline Wong)