Chinese Corporate Defaults Ramping Up

Zhong Anxiao failed to payback 2015 bonds and its 2016 bond plummeted 40 percent in trading before being suspended.
QQ: 债市爆雷不断:“16中安消”暴跌40%被临停
Zhong Anxiao stated in its announcement last night that the company’s production and operations were normal, but due to the impact of the overall market environment, the company’s multiple accounts receivable failed to be repatriated at the expected timing, causing the current liquidity to be tight.
Corporate defaults are racking up and the fundamentals are not positive:
Since the beginning of this year, 19 domestic bonds have breached contracts, involving a total amount of more than 13 billion yuan. Shen Wanhongyuan’s fixed-income research team pointed out that the volume of bonds maturing in 2018 will increase, profit margins are worsening, with the backdrop of increasing financing pressure, it is expected that 2018 credit risk events will further increase.
Adding to that risk: the rise in Chinese 10-year government bond yields.
Treasury bond futures quickly dive

The frequent outbreaks of recent default events have also been transmitted to the treasury bond futures market. In early trading on Tuesday, the treasury bond futures plummeted. The 10-year Treasury bond futures of CIFX extended the downward trend of the previous trading day, falling 0.32% in early trading, and the five-year Treasury bond futures fell 0.05%.
Ping An isn't optimistic:
Ping An Securities analyst Chen Hao believes that since April, low-grade credit spreads have shown a trend of broadening, and concerns about credit default risk have been reflected in market prices. After the rigid redemption is broken, the credit risk faced by the low-grade credit debt is increased, and the default becomes more normal. Second, the current overall financing environment is tight, and the financing of weak-quality companies lacking sufficient cash flow is more difficult, and the risk of credit debt default is high. Higher rate of return as a compensation; Finally, under the strict supervision trend, the city investment platform will continue to be separated from the local government, the lack of a stable independent source of profits of the city investment platform or will face the risk of bankruptcy, its issuance of urban investment bonds credit spreads Will continue to go wide.

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