Asia's junk bond returns are lagging behind investment-gradedebt like never before as China's weakest projected growth since1990 and escalating leverage expose cracks across the region'seconomies.

Speculative-grade notes denominated in dollars have gained 2.76percent this year through May 9, 1.95 percentage points less thanhigh-grade bonds, according to index data compiled by JPMorganChase & Co. The underperformance is the worst over the sameperiod since at least 2005. Globally, returns were about even at4.1 percent, Bloomberg indexes show.

Increasing indebtedness in the world's second-largest economyand twin deficits in nations from India to Indonesia mean twice asmany Asian companies are facing rating downgrades this year thanthe average in the past decade, Standard & Poor's said on April28. With Chinese corporate debt more than doubling since 2009 to$2.01 trillion, yields that investors demand to hold Asian junkbonds are approaching a one-year high as Premier Li Keqiang saidmore defaults may be inevitable.