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Bond Market Insights - Fri, 18 Nov 2022

The recent rally in China IG slowed on Thursday, most names just a tad tighter. Flows were fairly balanced in local government funding vehicles ( LGFVs), TMT and Leasing. Amongst the financials Tier 2 paper was still well supported, with real money nibbling away. On the recent new issue front BCHINA 4 ¾ 11/23/25 widened 4bps at the open and held there all day. The long end of TENCNT was under pressure, widening 6-7bps while rest of TMT was unchanged.

The tone turned a bit weaker for HY property, with profit taking from real money. Recent performers, such as Vanke, Longfor and Country Garden were down 7-10 pts. Gaming was 50 cents lower on fairly balanced flow. SOE PERPs are still seeing good demand for high quality names. AT1’s were roughly unchanged.. Friday is opening slightly wider with reasonable 2-way flows from real money on both sides of the trade. The AT1 sector remains relatively firm, with most ex-China lines still giving 7-9% Yield to Call.

Aussie banks T2 widened 3-5bps in Asia yesterday. Overnight NYC flows were quite balanced and the new WSTP and NAB seniors helped the yankee senior space regain a couple of bps. Corporates opened a tad wider today with BHP long end +5bps on the headlines of the renewed and increased bid of $9.6bn for Oz Minerals following better selling from US accounts. AUD space is acting independently from other asset classes and remained stubbornly unchanged.

In Latin America S&P cut Argentina's sovereign credit rating to CCC- from CCC+, due to concerns over the amount of peso debt maturing in the next six months. Without access to the international capital markets, the government has had to fully rely on the domestic capital markets to meet its fiscal obligations. Domestic debt is about 20% of GDP, and refinancing is becoming increasingly difficult. Earlier this week the government completed a liability management exercise, extending the maturities of around 60% of its domestic debt supported by state entities, such as the Central Bank and the national pension fund (ANSES). The private sector did not take part..

Middle East credit continues to trade well. The jolt in rates post-Bullard yesterday caused a repricing in cash price terms, but spreads were resilient. Cash balances remain high and the uptick in issuance is providing some good entry points, such as Bank Saudi Fransi of Saudi Arabia BSFR 5 year bond which came with a 5.5% coupon and UAE’s Mashreqbank MASQUH 7 ⅞ 02/24/33 T2 bond, which printed at 7.95%, both saw good investor demand. High-beta names such as Oman and Bahrain are hitting multi-month tights, Oman tightening 100bps from recent wides. IG is still relatively unloved, with KSA and ADGB have retraced only 25bps off the wides.


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