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Bond Market Insights - Fri, 06 Dec 2022

China IG tightened another 2-5bps. More new issues came to the Asian market, but it was the wrong type, no supply coming from China onshore entities. There was some profit taking from both onshore and offshore banks and asset managers but not enough to satisfy the pre-Chinese New Year buying spree. The new Hong Kong Airport Authority (HKINTL) issues did well, tightening more than 20bps on good volume.

China property was strong following Wednesday’s headline that “China Weighs Measures to Shore Up ‘Too-Big-to-Fail’ Developers”. Country Garden and Seazen (FTLNHD) rallied 3-4pts.. The distressed SUNAC punched up +3pts, after securing bondholder approval to extend CNY 15.4bn of onshore bonds. CIFI too, as China Jinmao redeemed its $500mm 4% Senior perp/23. As the day closed China SCE group took the biscuit, rising 8pts on headlines that it plans its first state guaranteed yuan bond.

Away from China the EIBKOR 3yr, 5yr and 10yr deal had a similar performance, tightening 15-25bps from issue spread. New mandates from POSCO (POHANG) and SK Hynix (HYUELE) put some pressure on secondary prices. Malaysian bonds had no primary pressure and tightened 2-3bps, while Thailand saw better buyers of perps and some corporate bonds, although there was profit taking in Thai Oil and PTT Global Chemical.

Macau Gaming traded well with Studio City up between +2-4pts led by STCITY 28’s. Melco gave its parent company, Melco international (200 HK), a 15 month repayment extension on its revolver to June 2024. $200mm of the facility had been drawn down in April. The was no immediate impact on their bonds.

In Australia CBA announced a 2-tranche AUD deal, 2yr and 5yr, having printed a US$ 2yr deal earlier this week. We are still awaiting initial price talk, but given the large funding requirements ahead for Aussie banks the new deals should come with decent concessions to secondary issues, as per NAB’s recent USD bond. The four major banks are expected to issue between AUD110-130 billion in senior debt (including unsecured and covered) in both 2023 and 2024.

In the US cash bonds drifted slightly lower in both HY and IG. Four new deals priced were priced on Thursday, bringing the week to date tally to $61bn.

US Treasury front-end yields jumped, hit by stronger labor market data and more hawkish Fedspeak. Dec ADP employment climbed to 235k vs 150k estimates. The Fed’s George said she sees rates above 5%, potentially into 2024 and Bostic later said inflation remains way too high with ‘much work to do’ in achieving price stability. Eurodollar futures were led lower by the reds, which are 2024 dates, as Fed commentary supported the higher-for-longer narrative.

SFRM3, the June 23 Secured Overnight Funding Rate future, dipped below 95.00 for the first time since Nov 30th as the market implied that the terminal rate had climbed back above 5.0%. The market view is now reverting to a 50bp rate hike in February. Non-Farm payroll plays second fiddle to CPI presently, but will be watched closely today, average hourly earnings in particular. The market looking for a +203k print.


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