SHANGHAI, July 22 Yields on a short-term bond
issued by a troubled Chinese construction company have more than
doubled in recent days as hope fades that the firm can avoid
defaulting on Wednesday.
On July 16, unlisted Huatong Road & Bridge Group Co Ltd
announced that it was uncertain about its ability to make
payment on a 400 million yuan ($64.4 million) one-year bond
issue that matures July 23, after its chief
executive was placed under investigation for illegal behavior.
On Thursday, one day after the announcement, the yield
spiked to a record high of nearly 15 percent, from around 6
At the market close on Monday, it remained around that level
even though state media reported on Friday that the company
expected strong government support in helping it recover
receivables and postpone loan payments.
"The spike in the yields indicates bondholders are not
confident the company will be able to pay on Wednesday," said a
bond trader at major state-owned bank in Shanghai, who spoke on
condition of anonymity because she is not authorised to speak to
"It is hard to predict whether the government will come to
bail out. In the future, investors will be more cautious about
bonds with lower ratings," she said.
Huatong has not made an announcements since July 16.
If Huatong doesn't pay on Wednesday, it will be the first
time a Chinese company has defaulted on a bond principal
payment, and the first bond default in China's interbank market,
the market that hosts around 94 percent of China's bond issues.
($1 = 6.2078 yuan)
(Reporting by Pete Sweeney; Editing by Richard Borsuk)