Junk bonds are proving the best bet in Hong Kong's dim sum market for the fourth consecutive month as a pickup in the world's second-biggest economy spurs risk-taking. Non-investment-grade yuan debt returned 2.5 per cent in the April-July period, compared with 1.2 per cent for higher-rated notes. The premium investors demand to hold junk securities fell to 184 basis points this week, according to an HSBC Holdings index, from this year's high of 235 basis points in March, when the nation recorded its first onshore bond default. Huatong Road & Bridge sparked concern of a second onshore failure before avoiding a default this week. "The high-yield segment is definitely where you want to be," said Yang Xi, a Beijing-based fixed-income analyst at Citic Securities, the nation's largest brokerage by market value. "Yields are attractive, plus there's an improving Chinese economy and a yuan that is potentially resuming its appreciation trend." The high-yield segment is definitely where you want to be YANG XI, CITIC SECURITIES China's gross domestic product rose 7.5 per cent from a year earlier in the April-June period, after a 7.4 per cent gain in the previous quarter, official data shows. "We bought some high-yield property dim sums during the sell-off earlier," said Gordon Tsui, deputy chief investment officer at Hang Seng Investment Management in Hong Kong, which oversaw some US$17 billion of assets at the end of June. "There are more signs that the central government will support the real-estate sector, so we aren't too concerned with the outlook." More local governments are relaxing property curbs after new-home prices dropped in June in a record 55 of 70 cities tracked by the statistics bureau. The declines were the most widespread since January 2011. Chinese developers are frequent issuers of high-yield dim sum bonds. The real-estate industry accounted for 17 per cent of all outstanding offshore corporate yuan bonds, the second-largest chunk after the banking sector, a Bank of America Merrill Lynch index shows. Risk sentiment in China's onshore credit market slipped after Huatong Road said last week that it may fail to make a payment on a 400 million yuan (HK$503 million) note. The company paid all principal and interest on the bonds due on Wednesday. "Huatong is just a small private company, which shouldn't have much spillover impact on the offshore yuan bond market," Yang said. "Chinese issuers in the dim sum bond market, be it investment grade or high yield, have much more solid financials."