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Faltering Bonds Condense Risk as Builder Collapses: China Credit

China’s faltering bond market is forcing banks to pick up the slack, spoiling Premier Li Keqiang’s efforts to spread financial risks as defaults extend from solar companies to real-estate developers.

New notes issued minus maturing securities fell 64 percent to 133 billion yuan ($21.5 billion) in the first two months of 2014, while new yuan loans made up about 69 percent of total credit in February, the most in seven months, according to central bank data. The yield on five-year company securities rated AA- rose 128 basis points in the past year to 7.71 percent yesterday, compared with an average 5.6 percent on high-yield U.S. debt, according to a Bank of America Merrill Lynch Index.