Losses in Chinese debt markets are spreading beyond the real estate sector which has send the nation’s investment grade bonds to to a 21-month low as creditors concern grows over even blue-chips borrowers.
Concern including Beijing’s crackdown on tech companies to rising U.S. rates as well as Russia-Ukraine conflict played a major part in fall in investment grade bonds.
The tumble in Alibaba’s bonds sent the yield spread on its 10-year dollar note to a record high on Thursday. Bloomberg index of Chinese investment-grade debt dropped to the lowest level since June 2020.
The selloff is burning investors who thought higher-rated bonds would provide a haven from the liquidity crisis that triggered record defaults by developers including China Evergrande Group.
“In light of the intensifying Russia-Ukraine conflict, there are sellers for off-the-run names, new issues, and high-beta names,” said Wu Qiong, executive director at BOC International, as reported by Bloomberg.
