China’s state-owned enterprises are being forced to issue bonds at higher interest rates after a slew of high-profile defaults shattered investor confidence in what was once seen as a risk-free asset class, reported the Financial Times.
Data from East Money, a financial data provider, show the average coupon rate for newly issued SOE bonds has hit 5.7% since October, when a number of state-run companies, ranging from coal mines to automakers, failed to make principal or interest payments on their maturing debts, said the FT.
This was 1 percentage point higher than the 4.7% recorded in the first three quarters of this year.
“We used to price SOE bonds based on how strong their government backing was,” said Zhang Pan, head of credit rating at a Shanghai-based bond fund. “We will have to pay more attention to their fundamentals in the future.”