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Bonds at Distressed Levels Close to Record Highs: JPMorgan

Defaults among emerging market companies continued to mount in the third quarter, the US investment bank said, due to troubles in Russia as well as China’s property sector.


More than a third of Russian corporate bonds are now in default, partly because of sanctions imposed by the West over its invasion of Ukraine. This image shows the skyline of Moscow. File photo from October 2015 by Andrey Kuzmin, Reuters.

 

The volume of bonds trading at distressed levels is close to record highs, JPMorgan warned on Tuesday.

Defaults among emerging market companies continued to mount in the third quarter, the US investment bank said, due to troubles in Russia as well as China’s property sector.

The year-to-date default rate for emerging market high-yield firms reached 10.3%, the bank found in its latest default monitor.

Russian defaults lifted the rate in emerging Europe to nearly 22%, while China’s property sector woes saw the default rate across Asia at close to 13%.

The latest remarks aware no surprise, given JP Morgan first revealed this situation in Russia and China six months ago.

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Third of Russian Corporate Bonds in Default

“Russian corporate default activity has been dominated by payment delays and consent solicitations to either extend grace periods or add alternative payment options, which led to inclusion of such bonds in our default metrics,” Alisa Meyers wrote in a note to clients.

Russia’s year-to-date default tally includes over $30 billion of Russian corporate bonds, translating into a default rate of 34.5%, Meyers added.

Excluding the troubled areas of China property, Russian and Ukrainian issuers, emerging markets corporate default rate stood at just 1.2%, with JPMorgan predicting that this could rise to 2% by year-end.

The amount of emerging market corporate bonds that currently trade at distressed levels of less than 70 cents on the dollar remained close to record highs at $185 billion or nearly a quarter of the high-yield segment of the asset class, more than three times where it stood at the start of the year.

 

  • Reuters with additional editing by Jim Pollard

 

 

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KLA Seen Ending Dealings With China After US Chip Curbs

 

Russia Foreign Debt Default is First in More Than a Century

 

Putin Says Russian Economy Rerouting Towards China, India

 

Russia, China Woes Risk Worst Default Wave Since 2009 – JPMorgan

 

Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.

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