Default Fears Make Some China Local Bonds Lemons of Market
- Survey of market participants shows nobody likes LGFVs
- China corporate bond sales to rise this quarter, survey shows
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The borrowing units set up by China’s local governments in the wake of the global crisis have long been a bugbear for national policy makers in Beijing. Now, rising fears of defaults are making their debt the ugliest part of the world’s third-biggest bond market.
That’s the consensus of 22 Chinese bond traders and analysts surveyed by Bloomberg last week -- none of whom are positive about the local government financing vehicle sector in the fourth quarter. Some 18 respondents said LGFVs, which help finance roads, bridges and sewers, will have to pay higher coupons to obtain yuan financing.