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Asia Bond Blurb - Tues Mar 22 2022

The US treasury market was closed yesterday morning due to a holiday in Japan, which limited activity in Asia IG until London’s opening, when UST yields pushed up again. IG spreads tightened, HAOHUA and HKAA long end in 10 bps. 5yr SOE names tightened 8 bps despite having traded heavily in the last few sessions. TMT 10yr+ spreads remained unchanged absorbing the recent selling from US and Asia real money accounts. The long end buyers are mostly fast money and dealers accounts covering short cover positions. Real money was busy conservatively mopping up the short end.

AMCs performed well with HRINTH up 1-2.5pts on positive earnings, the rest of the sector was up about 0.50pt. India remained firm but ran into profit-takers in 10yrs as it rallied 10bps. Asia T1 outperformed, up 1.5pts today.

The squeeze continued in HY. Non-China HY space up by as much as 2pts, Macau Gaming up another 3pts. Some Non-China HY names have rallied 7pts since Wednesday. China Property is trading in an idiosyncratic manner. Country Garden was up 2pts yesterday and today Moody’s has affirmed the Baa3 ratings, changing outlook to negative. RONSHINE lower by as much as 7pts on the resignation of PWC as auditor on 18th March and the announcement that although unaudited results will be released on 31st March, audited results will be delayed.

Evergrande plans a global investor call this week “to brief investors on Evergrande’s debt restructuring framework”. The 3 HK listed companies under the Evergrande umbrella halted trading as of March 21st.

Other Chinese property developers are also scheduled to release earnings before 31st March. Worries are that with greater diligence needed auditors may not be able to complete the work on time. The market will also watch for audit opinions, to be released April/May. Cash balances will also be scrutinised due to concern over pre-sale escrow account restrictions, as will the accounting for revenues from JV’s and associates, which could lead to restatements of previous accounts, as was the case in Yuzhou’s FY20 results. There will also be pressure over off balance sheet debt and guarantees for private placements.

Tuesday morning:- Non China HY slid by as much as 1pt as buyers paused to assess the next move. ETF's, usually a good indicator, were absent..

Property drifted lower. COGARD and CIFIHG retracing yesterdays move, down 0.5-2.5pts. SUNAC and SHIMAO have joined Ronshine in delaying the publication of FY21 audited results.. SUNAC slipped 5pts early on, but almost fully recouped the loss by the end of the session, the 2022's even traded marginally higher than Monday's close on short covering.

In Asia Sovereigns, following the 3-tranche Philippine new issue. Indonesia is about to offer a 2 tranche 10yr and 30yr deal while holding a tender offer for some shorter dated bonds (a buyback). Markets were already on the back foot given the move in rates overnight and INDON weakened on the supply announcement. The 5yr and 10.5yr new PHILIP bonds are holding in well, while the 25 year is feeling the brunt of UST sell off. Frontiers remain muted, although cautious.


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