Default alarm sounded as Li shakes bond safety net

Local financing vehicles' repayment won't be guaranteed, premier says

Ratings agencies have warned that the risk of defaults in China has risen as Premier Li Keqiang pares implicit guarantees for local government financing vehicles.

The yield premium over the sovereign for three-year AA corporate bonds, the most common grade for LGFVs, widened 21 basis points from last month's four-year low to 199 bps last Friday.