China Bonds at Center of Crisis Fears Are Posting Surprise Gains
- LGFV bond spreads over sovereign debt have shrunk this year
- Recent near-default has increased concerns about LGFV debt
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For all the concern about a debt crisis facing China’s local governments, the bonds most exposed to a potential blowup are proving among the country’s best investments this year.
Some money managers are betting that debt issued by local-government financing vehicles — known as LGFVs — will benefit as Chinese authorities prioritize stabilizing economic growth, giving them an additional reason to ensure regional governments and their financing arms stay solvent.