By Nathaniel Taplin

SHANGHAI (Reuters) - Upward pressure on Chinese bond yields eased this week after data showed net corporate debt issuance fell in May for the first time in nearly six years, but analysts said sentiment remains fragile after several high-profile defaults.

Markets also remain uncertain over whether there has been a shift in government policy amid concerns over rapidly rising levels of corporate debt.

Central bank data issued late on Thursday showed net corporate bond issuance declined last month for the first time since July 2010. Those figures were more detailed than monetary data released on Wednesday.

May gross non-financial corporate bond issuance was 550.5 billion yuan ($83.56 billion), down 22.7 percent from April, while net corporate issuance was a negative 39.7 billion yuan, down from 209.6 billion yuan ($31.82 billion) in April.

"Sentiment in bond markets has not recovered," wrote ANZ economists David Qu and Raymond Yeung in a note Thursday.

"The government has yet to decide on a strategy to deal with high corporate leverage."

China's onshore bond market saw a major correction in April as central bank statements on curbing overcapacity in legacy industries and several defaults combined to undermine investors' confidence in state-owned debt, which investors have long assumed enjoys implicit government protection.

Chinese firms canceled or delayed over $15 billion of bond issuance in April as yields spiked dramatically over the course of the month.

Yields on AA-rated one-year commercial paper, which rose over 60 bps that month, finally leveled off in late April following a series of large capital injections by the central bank.

Yields have since stabilized but at the cost, apparently, of a dramatic fall in issuance.

With May data showing overall money supply (M2) growing at its weakest since June 2015, weak corporate bond issuance will add to fears that credit may be tightening too rapidly following record loan and issuance numbers in the first quarter.

Still, some analysts cautioned that the corporate issuance data might not be as weak as it appeared, citing an ongoing municipal debt swap program designed to help cities refinance expensive corporate debt.

"While the contraction in May corporate bond issuance might seem worrisome, the drop is minor when compared to year-to-date corporate bond issuance, which has more than doubled January to May on a year-on-year basis," said Gilliam Hamilton, head of NSBO China Policy Research in Beijing.

"Another important factor that is not readily apparent in the data is the 1.6 trillion yuan year-to-date local government debt swaps, which translates to a larger growth figure than what's on paper."

Corporate yields held largely stable following the latest issuance data. Five-year AA rated bonds yields were down one basis point on the week to 4.63 percent, while equally rated one- year commercial paper yields were up one basis point on the week to 3.88 percent.

(Reporting By Nathaniel Taplin; Editing by Kim Coghill)