Will the subsidiary's purchase of parent company bonds reduce the leverage of the parent company?

Yes, the subsidiary's purchase of the parent company's bonds usually reduces the leverage ratio of the parent company. Leverage ratio refers to the ratio of a company's debt to its assets. The purchase of parent company bonds by subsidiaries is essentially to transfer the debt of the parent company to subsidiaries, thus reducing the debt burden of the parent company. As the debt decreases, the leverage ratio of the parent company will also decrease accordingly.

The effect of this operation is similar to the debt reduction behavior of the parent company, which can improve the financial situation of the parent company. Reducing leverage may bring the following benefits:

1. Reduce financial risks: Reducing liabilities means reducing the financial burden and debt repayment pressure, thus reducing the financial risks faced by the company.

2. Improve the credit rating: The reduction of debt usually has a positive impact on the company's credit rating. A higher credit rating can help companies get financing more easily and borrow at lower interest rates.

3. Enhance investor confidence: Reducing the leverage ratio can send a steady financial signal to investors, thus enhancing investors' confidence in the company and their recognition of the company's stock.

It should be noted that although the purchase of parent company bonds by subsidiaries is beneficial to reduce the leverage ratio, this operation is only a financial means, and whether it is appropriate depends on the specific situation and the company's financial strategy. In addition, relevant laws and tax regulations need to be considered. Therefore, in practice, the company should comprehensively consider various factors to make decisions.