Free Trial

Dec/Mar Tsy Roll Update: Heavy Volumes


Preview 7Y Note Auction

Real-time Actionable Insight

Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.

Free Access
MNI (London)
Repeats Story Initially Transmitted at 09:10 GMT Feb 27/04:10 EST Feb 27
     BEIJING (MNI) - A cash crunch for local government financing vehicles could
prompt further bond defaults by state-owned companies involved in local
infrastructure projects, a senior Moody's official told MNI Tuesday.
     "Defaults of LGFVs are due to liquidity (constraints)," Kai Hu, a senior
vice president at the ratings firm, told MNI. 
     Stricter regulations on non-standard credit assets have seen investors pare
holdings, leaving LGFVs struggling to find new avenues of finance, Hu said.
     "Usually the first defaults are in non-standard credit assets ... It's
largely due to stricter regulations leading to investors backing up and thus
lack of refinancing channels," he added.
     For local governments with weaker fiscal profiles, it will lead to more
defaults of non-standard credit assets this year, he said.
     Hu's comments came as Qinghai Provincial Investment Group Co, regarded as a
LGFV due to the levels of government support and supervision, defaulted on a
CNY20 million bond Monday. Although the company claimed the default was due to
"technical" issues during the payment process, the move further worried
investors already on edge. 
     "LGFVs need to improve their debt management," Hu told reporters. "But if
such defaults affect the overall stability of the regional LGFVs, higher-level
government will certainly intervene," he added.
     Overall LGFV debt is expected to be more manageable this year, as local
governments look to increase revenue from sales of state-owned assets such as
land, along with receiving fiscal transfers from central government, analysts at
Moody's told an earlier press conference.
     Bond defaults seen last year in the auto, steel and aluminium sectors are
not directly related to trade tensions between China and the U.S., Moody's Hu
noted. This year, bond defaults won't be concentrated in specific areas and
would be "behaviour-oriented", not linked to the trade spat.
     "Last year's bond defaults were more due to individual companies' behaviour
such as weak governance, blind expansion of non-core businesses and
deteriorating relationships with major stockholders," Hu told MNI. "This year
bond defaults will continue not appear sector-oriented."
--MNI Beijing Bureau; +86 (10) 8532-5998; email:
--MNI London Bureau; tel: +44 203-586-2225; email:
MNI London Bureau | +44 203-865-3812 |
MNI London Bureau | +44 203-865-3812 |

To read the full story

Why Subscribe to

MNI is the leading provider

of news and intelligence specifically for the Global Foreign Exchange and Fixed Income Markets, providing timely, relevant, and critical insight for market professionals and those who want to make informed investment decisions. We offer not simply news, but news analysis, linking breaking news to the effects on capital markets. Our exclusive information and intelligence moves markets.

Our credibility

for delivering mission-critical information has been built over three decades. The quality and experience of MNI's team of analysts and reporters across America, Asia and Europe truly sets us apart. Our Markets team includes former fixed-income specialists, currency traders, economists and strategists, who are able to combine expertise on macro economics, financial markets, and political risk to give a comprehensive and holistic insight on global markets.