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China Bank Says Bond Guarantee Forged as Market Mood Worsens

  • Guangfa says documents and chops for a guarantee are fake
  • Yield premium for China company notes rises most since 2007
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China Guangfa Bank Co. said Monday that documents and seals for a letter claiming to guarantee bond payments by the lender were forged, in the second such incident in the nation this month, raising concern about transparency in the world’s third-biggest bond market.

The revelation by the bank based in the southern province of Guangdong comes after Zheshang Property & Casualty Insurance Co. said on Dec. 23 it’s in touch with Guangfa Bank over payments on Cosun Group’s private bonds guaranteed by a unit of the lender after the notes defaulted on Dec. 20.