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Chinese Junk Bond Yields Surge to Decade-High as Property Developers Continue to Miss Payments

By Fran Wang

International investors sold their junk bond holdings of Chinese property developers in the past week, driving borrowing costs to a decade high, and further restricting the capacity of cash-strapped developers to access critical funding.

The average yield on an ICE Data Services index of Chinese high-yield dollar bonds, which property companies dominate, surged close to 30 percent this week, up from 14 percent at the beginning of September, reported the Financial Times. The surge pushes the leading barometer of borrowing costs to the highest level since the 2008 global financial crisis.

Junk bonds, also known as high-yield bonds, refer to those with credit ratings lower than investment grade—BB+ or lower by S&P Global Ratings and Fitch Ratings, or Ba1 or lower by Moody’s Investors Service. They are deemed more likely to default but could offer investors a better payoff for the risk.

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