Chinese HY USD bonds continue shift to short tenors despite uptick in sentiment

APAC Chart of the Week: 22 March 2019

Last year’s shift to short term tenors for Chinese offshore high yield bonds has continued to this year despite a strong recovery in overall sentiment.

Around 72.5% of the total issuance by value so far this year had tenors of three years or less, only slightly lower than the 78.5% in 2018, when the market sentiment was generally poorer. But both figures are way above the 45% in 2017, a record year for high yield issuance in Asia.

Signaling the recovery in sentiment this year, Chinese USD HY bond volumes so far in 2019 totaled USD 26.25bn, already 47.8% of the entire 2018 volume. Nonetheless, the average tenor by number of deals has reduced to about 2.55 years in 2019 YTD from 2.64 years in 2018 and 3.36 years in 2017.

As an example, Chinese property developer Kaisa Group, which managed to print seven-year paper in 2017 at 9.375%, issued USD 400m 11.75% bonds in February 2019 with a two-year tenor and a 12% yield, although at least some of that is a reflection of the credit. In December 2018, the company issued USD 100m 12% bonds with a tenor of just 12 months.

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