China is expected to issue over CNY1 trillion of Special Treasury Bonds (STBs) in the third quarter to fill a fiscal gap and to help meet economic and employment targets, MNI reports, quoting policy advisors and market analysts.

The industry experts also called on the central bank to increase liquidity in order to accommodate the massive debt sale.

According to a recent report from Renmin University, the government would see a gap of about CNY2.6 trillion as fiscal income may decrease for the whole year.

To cover the extra spending, analysts predict the government may launch CNY1 trillion to CNY2 trillion of STBs in the third quarter if the State Council proposes the same.

The STBs are likely to be a necessary move if the country insists on a GDP growth target of around 5.5%, MNI notes.

Market reaction

AUD/USD fails to find any inspiration from the above headlines, as it loses 0.39% on the day at 0.6878, at the press time. Meanwhile, USD/CNY drops 0.14% to 6.6972.

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