China Bond Market Signals Default Risks Are Easing, for Now (Bloomberg)
Bloomberg Aug 23, 2018
A retreat in China’s short-term junk bond yields is signaling optimism the threat of widespread defaults looming on the horizon is diminishing.
China’s one-year AA- rated bond yields have fallen 12 basis points this month, while its premium over similar-maturity AAA rated notes is headed for its biggest monthly drop since November 2016. China’s recent move to help smaller firms cut financing costs is easing default risks and boosting market sentiment, according to Citic Securities Co.
“The trend of credit expansion is becoming more and more obvious,” said Lyu Pin, a bond analyst at Citic Securities. “With sentiment in the primary market recovering, lower-rated bonds’ credit fundamentals are improving. The narrowing yield premium shows investors are expecting default risks to decline.”