China Investors Prefer Safer Bonds After Shanshui Default
- Yield gap between AAA and AA- widened most in one month
- Analysts warn of steel, coal and cement industry risks
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Chinese investors showed a preference for the safest corporate debt after a default by a cement maker fueled speculation that failures among lower-rated borrowers may spread.
The yield premium on one-year AA- graded bonds over AAA notes rose two basis points on Wednesday, the most since Sept. 25, after China Shanshui Cement Group Ltd. said it will fail to pay 2 billion yuan ($314 million) of securities amid a shareholder tussle. The company, whose onshore subsidiary has a CC credit score, is at least the sixth this year to default in the local note market as a slowing economy drags on earnings.