China Junk Bonds' Longest Winning Streak Unnerves Investors (Bloomberg)
Bloomberg Aug 03, 2018
The return of China’s dollar-denominated junk bonds from the brink with the longest rally on record is showing signs of strain.
After 13 straight days of declines, yields on Chinese speculative-grade notes have bounced back, climbing for the past two days to hit 9.5 percent Aug. 2, ICE Bank of America Merrill Lynch indexes show. While yields have been falling as authorities take an easing path to bolster its economy, Dongxing Securities (HK) Asset Management Co. says the risk that China could once again give more prominence to its deleveraging drive may spoil the party.
“Although market sentiment has improved quite a bit for now, no one knows at this point how long the easing policy will sustain,” said Chak Lau, a credit investment manager at Dongxing Securities (HK) Asset Management Co. “It’s difficult to say whether the central bank will stop the music and continue to emphasize the deleveraging campaign again. Therefore, the potential risk of the spread to widen again is still lingering.”