Warning Signs on the Mad Rush for Convertible Bonds


Some Chinese convertible bonds are 330% oversubscribed. What's the problem?

Issuance of equity-linked instruments has surged. Notably, a Chinese convertible bond deal had more than $1 trillion in demand.

The Financial Times reported Chinese Bank Raises More than $7 Billion with Record Convertible Bond.

Bit of Advice

Michael Pettis at China Financial Markets has this bit of advice:

"This stuff may feel like [cheap] equity, but it’s always at the worst possible time that you discover that it is really debt."

I took the liberty of adding the word "cheap".

Seems appropriate given the massive over-subscription at world record levels.

Mike "Mish" Shedlock

Comments (8)
No. 1-3

1 trillion? It's not just that it's a big number, but it's just one trade, in one market!


Mish, that is 330 times… what does that make 23.000% ? crazy shit


The Chinese people live under capital controls with no social safety net. With central banks everywhere promising "whatever it takes" this probably appears as close to a safe investment as it gets for them. Cosmic scale CB mismanagement begets matching moral hazard, eventually. Welcome, fellow travelers.

Global Economics