The rise in yield and expectations of increased supply have combined to push down prices of the newly issued local government bonds, raising the cost for prospective issuers.

Since March, China's Ministry of Finance (MOF) has issued eight bonds on behalf of local governments, with the coupon rates rising about 20 basis points.

The latest bond issued by Shandong province carried a coupon rate of 1.8 percent per year, up from 1.61 percent for the first such bonds issued by the Xinjiang Uygur autonomous region.