China Bond Market Defaults are Going down a Rabbit Hole

China Bond Default

China’s bond markets are going down a rabbit hole that may be deeper than any other rabbit hole before it.  Defaults and failed offers are starting to cause massive issues with China’s bond market.

Chinese companies issued 382.7 billion yuan ($58.5 billion) of notes onshore in April which is down 11 percent from the same period last year.  March data was also 57 percent down from the previous year.  With just eight trading days to go, fundraising may fall short of the record 547.3 billion yuan of debt due. That would mark a shift after sales were 83 percent more than maturities in April and almost three times higher in March.

The faltering $3 trillion corporate bond market will put pressure on Premier Li Keqiang’s to cease his determination to allow zombie companies to fail. At least 10 issuers have reneged on onshore debt obligations this year, while 153 Chinese firms have pulled 175 billion yuan of domestic sales this quarter. Shandong Iron & Steel Group Co., which canceled a 3 billion yuan bond offering on May 4, has 3 billion yuan of securities due this month and 30 billion yuan to repay this year.

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