Junk Yield Premiums Soar on China’s Looming First Default
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The extra cost to borrow for China’s riskiest companies is at the highest in 20 months as soaring interest rates heighten concern the nation will experience its first onshore bond default.
The yield gap on five-year AA- notes over AAA debt jumped 27 basis points last month to 224, the most since June 2012, Chinabond indexes show. Ratings of AA- or below are equivalent to non-investment grades globally, according to Haitong Securities Co., the nation’s second-biggest brokerage. The similar spread in the U.S. is 403 basis points, Bank of America Merrill Lynch data show.