China’s Riskier Short-Term Corporate Bond Spreads Hit Record Low

The Chinese central bank’s latest monetary easing has triggered a fresh rally in local corporate bonds, sending risk premiums to a record low as investors ramped up leveraged bets.

Yields on one-year AA rated onshore company notes are 41 basis points above those on comparable government debt, turning the so-called credit spread into the tightest since 2007 when Bloomberg-compiled data became available. Risk premiums on similar AAA rated corporate bonds and negotiable certificates of deposit, a popular funding tool for banks, also reached their narrowest since 2022.