Sunday, May 30, 2010

The Debts of the Lenders: Chinese Bond Holders Demand Higher Interest Rates

In a sign that bond holders of Chinese property developers are growing impatient, the market raised rates as the prospect of risk appetite diminishes.

Yields on the $3.9 billion of bonds issued by Kaisa Group Holdings Ltd., Country Garden Holdings Co. and seven other developers since January widened by an average 2.26 percentage points relative to Treasuries as of last week, according to data compiled by Bloomberg. That’s more than the 2.05 percentage- point increase in spreads for the seven dollar-denominated bonds sold by other companies in Asia outside Japan.

Investors are demanding greater yields to lend to China property firms, a sign they expect borrowers will have a harder time meeting debt payments amid a government clampdown down on lending. Goldman Sachs Group Inc. and Credit Suisse Group AG cut their profit estimates for Chinese real estate companies after a 12.8 percent rise in real estate prices in April from a year earlier spurred the state to increase regulation.
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