China will restart the auction of three-year local government bonds on August 28, according to a statement on the Ministry of Finance's (MOF) website.

A total of 11.2 billion yuan worth of bonds will go on sale, with Jilin, Guangxi, Heilongjiang and Inner Mongolia each restricted to selling a maximum of 2.5, 3, 3, and 2.7 billion yuan worth of bonds respectively.

All the bonds will be issued by the MOF on behalf of the local governments.

This package of local government bonds was supposed to be issued on July 13, but due to the rise in interest rates offered in open market operations, the resumption of domestic IPOs and the fact that local government bonds have a relatively low rate of return, the MOF decided to delay the auction.

The MOF later announced that it would combine the issuance of debts from different governments to enlarge the scale of the auction.

Now that the central interest rate has stabilized and there has been a temporary halt to new IPOs, the MOF has decided to resume the issuance of local government bonds.

Local governments have already issued 177.8 billion yuan in bonds this year, 89 percent of the total quota for 2009 of 200 billion yuan.

Links and Sources
Ministry of Finance: Announcement (Chinese)
Wall Street Journal: Graph