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Spread curves of fundamentally weaker China property bonds likely to flatten off

In the China property space, fundamentally weaker bonds have relatively steep5Y/10Y curves, while stronger credits have fairly flat spread curves. For example, the BBB-rated GRNLGR bond trades at a bid Z-spread different…

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In the China property space, fundamentally weaker bonds have relatively steep5Y/10Y curves, while stronger credits have fairly flat spread curves. 

For example, the BBB-rated GRNLGR bond trades at a bid Z-spread differential of c.83bps versus the BBB+ rated CHIOLI bond, which trades at a bid Z-spread differential of c.42bps. 

Standard Chartered notes as follows on Friday: 

We believe this is temporary and that curves of fundamentally weaker bonds will eventually flatten off as investors go down the credit curve in search of yield.

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