Yet while some see the default as a good thing for China's corporate bond market, others worry it could be a sign of a wave of defaults to come.
Kicking off, she points to the prospects of a wave of defaults in Alt-A mortgages (low-risk, low-rate loans that are better than sub-prime and less than prime and are often made with little or no proof of a borrower's income).
The danger in a climate of deteriorating property prices is that as loans come due, lenders will be unwilling to extend new credit on favorable terms, triggering a wave of defaults and a further slide in rents.
Li also acknowledged that Beijing is attempting to rein in industrial overcapacity, which has raised the specter of widespread layoffs, and that "notable imbalances exist between government revenue and expenditures," a nod to mountains of local government debt that have raised fears of a wave of defaults and ultimately an economic hard landing.
In its lawsuit, filed in 2013, Miami contended that the two banks' targeting of prospective black and Latino homeowners for riskier, less favorable mortgage loans ultimately drove a wave of defaults, foreclosures and a fall in property values in the city.
Higher borrowing costs could lead to a wave of defaults and even to a crisis if too much debt was taken on during the boom.The EURACE project, an initiative by a consortium of European research bodies, has produced a sophisticated agent-based model of the EU's economy that scholars have used to model everything from labour-market liberalisation to the effects of quantitative easing.
Rather than facing the risk of a wave of defaults, investors are exposed to a repricing of risk through a decline in the value of sovereign bonds.
To the extent that investors are moving into equities, they are probably shifting out of cash and money-market funds, not bonds.So for a collapse in the corporate-bond market to happen there will either have to be a sudden reversal of central-bank policy or a wave of defaults.
The risk of banks calling in the loans and so causing a wave of defaults is very low.But does China face a debt headache?
"We don't expect a wave of defaults," he says.
Would he really be prepared to trigger a wave of defaults in order to clean up India's bad debts?
