China Ratings Downgrade Wave Seen as Next Driver of Bond Slump
- `Explosion of credit risks is spreading,' HFT Investment says
- 33 issuer downgrades in 2016, versus 17 in year earlier period
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China’s slumping onshore bond market is braced for rating cuts, as companies report weaker earnings and prepare for unprecedented debt maturities.
China Securities Co. and HFT Investment Management Co. predict downgrades will surge as a slumping economy makes financial reports due by April 30 a gloomy read. Companies in China must repay 547 billion yuan ($86 billion) of onshore notes in May, the most in any month ever, data compiled by Bloomberg show. Investors are avoiding risky debt, with the yield premium on three-year AA- rated local bonds, considered junk in China, widening 43 basis points in April, the most since 2014.