Bloomberg with a hair-raising report on what Wealth management Products are doing boost returns
- The ability of Chinese lenders' $2.4 trillion of WMPs to generate the returns they promise is being undermined as monetary easing has pushed corporate bond yields to a five-year low.
- Managers of the funds have been adding leverage, extending maturities and buying higher-yielding notes that are rarely traded, according to consultancy CNBenefit and HSBC Holdings Plc.
- "A large number of WMP funds have entered the bond market and used maturity mismatches and leverage to raise yields," said Gao Shanwen, chief economist at Essence Securities Co. in Beijing. "If you add the implicit guarantee to that, along with a general lack of transparency and regulation, the bond market really could be the next eye of the storm in financial markets."
Yikes ....
