Bondholders Trust China Too Much

China Zheshang Bank Co., the nation’s 19th-largest listed lender by assets, on Wednesday sold $2.2 billion of additional Tier 1 notes, its first marketed to offshore fund managers. The bonds rank above equity only if the firm is liquidated; don’t have a maturity date; and include clauses that could see them converted to potentially worthless shares if the institution’s capital falls below a threshold. Oh, and they also lack a credit rating.

Despite all that, the yield on the securities was only 5.45 percent, 214 basis points more than 10-year Chinese government bonds. If that doesn’t look too bad, let’s put this in perspective.

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