Bond Market Insights - Fri, 2 Sept 2022

Markets remained under significant downward pressure as economic data supported a wave of selling in both bonds and equities on the first day of the month. The US data this week has suggested the Fed still has a lot of work to do to reduce demand enough to bring inflation down. After a bad start, US equities lifted late in the session, S&P 500 finishing in the green. WTI fell 3.5% to US$86.4/barrel, gold was down at US$1,696/oz.


Tonight is Non-farm Payrolls. Will it ratify the market view, which currently is a 70% chance for 75bps hike on Sept 21? One has to assume that there are some shorts that will cover whatever the number, and above there will be some trapped longs looking to exit ahead of the long weekend (Labour Day). The short end should do better on a consensus number.


On Thursday the CIFIHG shares placement initially caused China HY bonds to trade higher, but it was later seen as being too small and bonds sold off.


Macau gaming remained heavy, driven lower by real money selling, down 1.5-2pts. Gross gaming revenue (GGR) for August was down 50.7% YoY (+450.0% MoM), missing Bloomberg consensus of down 48%. In July, visits to Macau from the mainland totaled 7,321, down -99.0% YoY. It is estimated that August Mass GGR declined 87–88% compared to August 2019, while VIP GGR was down around 95%.


KDB printed a two-tranche new issue, $1bn USD 3y at CT2+62 and $450m USD 10y at CT10+115 which were well received, the 3yr closing 7bps tighter.


As JPY broke the key psychological level of 140, first time in almost a quarter of a century, Japan credits opened the day soft with long end MIZUHO and NOMURA 2bps wider.


In the Middle East there were sellers of Oman, Morocco and Egypt , down -1pt in 10yr and -1.5pts in longer dates. Egypt is waiting for news on the closing of the IMF loan, so no idiosyncratic action. Saudi and Abu Dhabi were down 50 cents.