Defaults Worsen Bias Against Private Bond Issuers: China Credit

China’s first default is prompting investors to discriminate against privately-owned companies, boosting demand for local government bonds even as the central bank warns of the dangers of a $2.9 trillion pile of debt.

The yield on Tieling Public Assets Investment and Management Co.’s seven-year notes plunged 117 basis points this year to 6.72 percent and Changxing County Transportation Construction Investment Co.’s debt also rallied, exchange data show. The average yield on 2021 debt rated AA fell seven basis points this year to 7.55 percent yesterday, while that for notes ranked A climbed 12 basis points to 11.67 percent.