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Apr

06

Traders Are Worried About Chinese Local Government Debt Again

By Tony Seruga

Demand for the bonds wanes on angst Beijing pulling support
China saw the first LGFV credit rating downgrade this week

The scent of doom is returning to China’s local government bond market.

S&P Global Ratings pulled the trigger on the first ever downgrade of a Chinese local-government financing vehicle Thursday, citing the city in eastern Jiangsu province’s high debt burden. Traders and analysts are uneasy as well, with 18 of 29 polled in a Bloomberg News survey saying they’d sooner buy corporate debt than LGFV bonds.

Concern Beijing is trying to wean local bodies off their support is quelling demand for the debt, with the yield premium on LGFV notes versus company bonds swelling to near the most since March 2014…

Traders Are Worried About Chinese Local Government Debt Again

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