The middle of 2026 marks a period for the concentrated disclosure of tracking ratings in the credit bond market, with a notable increase in the number of rating termination announcements.

As of June 30th, the market has released over 300 rating termination announcements this year. In June alone, more than 120 new termination announcements were added.

In terms of structure, urban investment platforms are the primary group in this wave of rating terminations.

As of mid-June, urban investment entities accounted for 61.0% of all entities with terminated ratings this year, with a greater concentration among lower and medium-grade entities. For more than half of these, the outstanding bond balance is less than 2 billion yuan.

This indicates that rating termination is first occurring among entities with weakened financing needs and smaller outstanding bond scales.

For such issuers, maintaining a rating requires paying rating fees and cooperating with information disclosure and tracking work, while their future public bond financing needs are limited. Terminating the rating involves a certain cost-benefit consideration.

However, the motivations for terminating ratings are not entirely uniform.

Judging from the wording of the announcements, most issuers attribute the reason to "business development and subsequent work arrangements."

In practice, some entities are actively exiting the bond market to reduce maintenance costs; some are making transitional arrangements before changing rating agencies; and some entities with weaker fundamentals and already significantly widened financing spreads may terminate ratings to avoid the valuation impact of a rating downgrade.

Behind this change is the ongoing regulatory correction of "rating inflation" in the bond market.

Over the past several years, credit bond rating distributions have continuously concentrated towards higher grades. As of the end of the first quarter of 2026, issuers of outstanding credit bonds with ratings of AA+ and above accounted for as high as 59%, with AAA-rated issuers comprising about 27%.

Against the backdrop of a continuously rising proportion of high-rated entities, the differentiation of ratings for credit risk has been weakened, leading to a significant divergence between the market pricing of some bonds and their external ratings.

From March to April this year, relevant departments convened meetings with rating agencies multiple times, demanding improvements in rating quality and rectifying industry malpractices such as inflated ratings and low-price competition.

Under regulatory guidance, rating agencies have also begun adjusting their business rules.

For example, on June 29th, China Chengxin International Credit Rating Co., Ltd. issued and implemented its "Suspension of Rating System," clarifying that if the information necessary for conducting a rating cannot be obtained, the rating may be suspended. During the suspension period, the entity and bond rating results are not valid.

This sends a signal: rating agencies are no longer simply maintaining existing rating results but are treating information availability and sufficiency as prerequisites for continuous ratings.

For entities with insufficient information disclosure, significant operational changes, or difficult-to-assess credit quality, the room to continue "carrying a high rating" is narrowing.

However, terminating a rating does not mean the risk disappears.

As a batch of high-rated entities exits the rating sequence, the liquidity and valuation of outstanding bonds will face new market tests. For investors, with the absence of external ratings, pricing will rely more on the issuer's fundamentals, regional fiscal strength, debt structure, refinancing ability, and secondary market trading conditions.

Currently, market focus is mainly on AAA-rated entities whose coupons significantly deviate by more than 200 basis points from the corresponding maturity government bond yield.

Since 2025, 30 AAA-rated issuers have had issuance spreads exceeding 200 basis points, with some currently in an unrated state. Excluding real estate bonds, the potential scale of rating adjustments in the second half of the year could be in the range of 240 to 330 billion yuan.

This change may also affect the portfolio structure of some bond funds.

For instance, some pure bond funds primarily employing high-grade credit bond strategies have contracts stipulating that holdings of AAA-rated credit bonds must not be less than 80% of non-cash assets. Once a holding entity faces rating termination or downgrade, it may trigger internal risk control constraints, leading to pressure for passive portfolio adjustments.

In the process of correcting "rating inflation," rating termination is just the first step.

The real change lies in the credit bond market shifting from reliance on rating symbols towards repricing the issuer's actual credit risk. For investment institutions, a high rating no longer naturally equates to low risk. The credit premium behind the coupon is becoming more important than the rating itself.