China’s bond defaults could spike

As China’s banks start to fail, there is a bigger worry for the Peoples Bank of China (PBoC, the central Bank). China’s bond defaults are on the rise and US$7.8billion is coming due in 2020.

A record pace of defaults hit China’s domestic bonds this year. In 2020, it could be the offshore market’s turn.

That’s because of a looming wall of dollar debt, issued by now-stressed borrowers, that comes to maturity. There’s US$8.6 billion of offshore bonds coming due next year that currently have at least 15 per cent yields – classifying them as stressed, according to data compiled by Bloomberg.

Put another way, nearly 40 per cent of total outstanding corporate dollar bonds from China’s most troubled companies is due next year. With Chinese policymakers emphasising the need to continue a campaign to limit leverage, it suggests a pickup in defaults. For those lured ... [click for full story]

 


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