Major Chinese policy bank China Development Bank (CDB) had to reduce bond issues due to the drying up of interbank market liquidity and competition from other investment products.

CBD boasts of a credit profile that is as good as the Chinese government, but nonetheless, the lender was forced to cut a proposed 24 billion yuan ($3.9 billion) deal by 60 percent to just 10 billion yuan, and pay a yield of more than 5.5 percent last week, the Financial Times reported on Tuesday, due to the impact of a tight onshore credit market.

“Chinese 10-year Treasury bond yields are at a six-year high and are up about 100 basis points versus a year ago,” said one senior bond banker in Beijing. “CDB’s yields have widened by a bit more than 100 basis points and other corporate bonds are seeing yields rise by 150-200 basis points.”

Policy banks predisclose their issuance plans, so it is easy to see when they delay, said the head of ixed income sales and trading at a European bank in Shanghai.

The pressure from the tight credit market is also beginning to be felt by corporations. China Railway Corporation, a state-owned enterprise, was forced to delay a deal recently, while private companies including BYD, an electric carmaker, and Baidu, China’s domestic search giant, also saw deals delayed over the summer, according to the Financial Times.

Total onshore issuance for financial companies such as banks and insurers has fallen short of just the final quarter of 2012, at a meager $26.8 billion, while August, September and October this year were particularly weak. Other companies issued just $24.5 billion this year, far behind last year’s $39.7 billion total.

China’s bond markets were practically non-existent before the global financial crisis, but soared in recent years – the total of non-financial corporate debt outstanding in China is already as large as that in the U.S., which had decades of a head start on China.

Chinese issuers are dealing with the tight onshore market with more offshore issuance, raising a record $51.6 billion outside China so far this year, more than double the $24.5 billion raised in the same period last year, the Financial Times reported.