2015-06-17

Jiangsu Muni Bonds Still Falling in Price

A couple of weeks ago, I posted Jiangsu Munis Slump As Govt Doubles Supply. Christopher Balding had posted a chart of the bonds sliding to ¥96.20 in The Great Chinese Debt Restructure: The Saga Continues. Those bonds have since drifted lower still.

Nomura's China Local Debt Risk Map identifies Jiangsu debt as high risk.

Moody's shows Jiangsu's debt levels aren't high as a percentage of GDP, but much of the debt is short-term. FastFT: 中国哪个地方政府负债最重? (Where China's most indebted local govts are)

From 2013 Reuters: Is China's debt nightmare a province called Jiangsu?

Bloomberg has it's own risk map from Only in China Can Riskiest Provincial Debt Get Best Yield
The northeast is a high risk since industrial production is contracting.

Want Want:China has space to accommodate local gov't debt risks: Moody's
China has adequate fiscal headroom to absorb local government contingent liabilities, a recent report by Moody's Investors Service said.

As higher levels of local government off-budget investment financing pose a challenge to China's fiscal position, such debt levels are relatively moderate and can be absorbed over time by the sovereign's balance sheet, Moody's said.

"While local government financing operations raised the general government debt-to-GDP burden to 34% in 2014 from a low of 17% in 2005, China's debt trend appears to have stabilized," said Tom Byrne, a Moody's senior vice president for the Sovereign Risk Group. "In addition, the government has an appreciable amount of fiscal space to accommodate such known risks," he added.

RFA: China Shifts Course on Local Debt
China has backtracked on plans to curb off-book loans and local government debt as concerns about the economic slowdown continue to mount.

Nearly eight months after the central government ordered authorities to stop borrowing through poorly-regulated "local government financing vehicles" (LGFVs), it has eased rules for LGFV funding to spur economic growth.

"The reforms are now being reversed because President Xi Jinping's top priority is to shore up the economy," Bloomberg News reported on May 28 after the National Development and Reform Commission (NDRC) cleared the way for more local debt backed by LGFV loans.
It's not hard to understand why bond investors don't want to hold low yielding municipal debt.

No comments:

Post a Comment