CHINA: Growing Demand Dynamic for Bonds Sees Strong September

* With much of longer dated issuance done for September, the bond market continues to show resilience - even in the face of strong issuance. * Early September the MOF announced a major targeted issuance of 300 billion yuan (~$44.25 billion) in special treasury bonds specifically designed to replenish the Tier 1 capital base of eight major state-owned financial institutions. Whilst this was the dominant issuance theme for the month - and with the month not over yet - September is set for a modest decline in net issuance relative to August. * An article in the Shanghai Sec News today showed that as of September 21, the total assets under management of 53 bond ETFs reached 987.129 billion yuan, just 12.871 billion yuan short of the trillion-yuan mark. Combined with the asset size data disclosed in the semi-annual reports of off-exchange passive index bond funds, the total assets under management of the 384 passive index bond funds in the entire market reached 2,066.338 billion yuan. * When added to the demand by major banks (whose bond books now rival lending to individuals in overall size) it is clear that the demand for bonds will remain strong for the near term. * The 10-Yr is on t