$118 Billion In High-Yield Debt From Developing Nations Sold In 2019


High-yield dollar bonds from developing countries are selling at a record rate.

Throughout 2019, a total of $118 billion in high-yield dollar bonds were sold, with the majority coming from mainland China. The increase in high-yield bonds could be a result of stabilizing interest rates, which make U.S. Treasury bond yields low.

Chinese developers are issuing more and more debt, creating a high-yield opportunity for attentive investors. High-yield credit issued in Asia had a yield of 7.6% as of December 17th. This is larger than the yields for the same type of debt in the U.S.

Latin American high-yield debt is the only other type of debt that is competing at the same level as Asian high-yield debt.

“The global liquidity is still there, and given the difficulties in Latin American economies, one of the few places where that money can go is Asia,” said Chen Yi, head of global capital markets at Haitong International Securities. “So we’re bullish on dollar high-yield debt in Asia. Plus, demand for Chinese property is still hot.”

However, these high-yield bonds also present increased risks for investors. Of the high-yield debt issued in China, 4.5% of private companies issuing that debt defaulted on their bonds.

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Economics, Finance and Investing