China dollar junk bonds set for worst drop since at least 2013

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CHINA’S high-yield dollar bonds slumped as stress weighed on real estate firms that are the nation’s biggest issuers of such debt.

The average price of the securities fell about 4 cents on the dollar Tuesday morning, according to credit traders. That’s set for the steepest drop in at least 8 years, according to a Bloomberg index of the notes.

The slump comes after another Chinese developer, Fantasia Holdings Group Co., fell into crisis. Fantasia didn’t repay a $205.7 million bond that was due Monday, according to a company statement.

That’s adding to the strains on the nation’s heavily leveraged property firms following industry giant China Evergrande Group’s debt woes. Weaker-rated borrowers such as Kaisa Group Holdings Ltd. and Modern Land China Co. are also set for the biggest drops in their dollar bonds in at least a year, though thin liquidity due to China’s Golden Week holiday is accentuating some price moves this week, traders said.

Souring investor appetite for Chinese dollar junk bonds is also adding to refinancing pressures for real estate issuers as yields on these notes climb to near their highest in about a decade. Sales of these notes fell to $6.7 billion for the period between July to September, the worst quarter since late 2017, Bloomberg-compiled data show. – Bloomberg



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