Throughout this year, investors in China’s bond market have preferred high-yielding corporate bonds to boost returns in an environment of rising funding costs. That strategy took a hit over the past three weeks as credit events and defaults in the bond market are driving yield spreads significantly wider. Higher-rated and investment-grade corporate bonds are being sold first, but the impact on high-yield issues bearing lower ratings may be more dramatic as banks redeem funds placed with non-bank financial institutions.
