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Bond Market Insights - Fri 29 Sept 2023

Debt markets slid again, with heavy selling of longer US treasury futures for the second day. USTs bottomed by around 09:45et with 5y yields peaking at 4.74%, 10s at 4.68%, 30s at 4.807%. UK Gilts tumbled 1 ½ points, achieving a yield of 4.5%, bunds got to 2.98%.

There has been a resurgence of interest in the offshore Chinese Yuan denominated Dim Sum bond market. Issuers are attracted by the widening interest rate differential between China and the US. Total issuance is expected to reach US$68bn equivalent by year end (CNH 500bn).

Volumes for Panda bonds, the onshore market for non-Chinese issuers, are expected to grow by 50% next year, despite hurdles presented by regulatory oversight.

Egypt’s bond market grapples with an unprecedented crisis in Egypt, the Arab world's largest nation by population. Moody's Investors Service recently prolonged a review for a potential downgrade of Egypt's credit rating, while the IMF has delayed the first and second review of a $3 billion package. EGYPT 7 ⅝ 05/29/32 is trading with a big figure of $58, yielding around 17%.

The issuer is now turning to the Panda bond market, and back in June the African Development Bank approved a Partial Credit Guarantee (PCG) to $345mm. This would allow Egypt to issue yuan denominated $500mm equivalent of Green and Blue bonds, linked to environmental and water projects, as well as social and sustainable bonds, which are related to women’s empowerment.

In another effort to diversify funding sources, Egypt issued its first Samurai bonds in March 2022, selling $500m worth (about JPY 60bn) of bonds denominated in Japanese yen, becoming the first Middle Eastern country to do so.

Back to the US, the Washington Post reported today that a contingent of far-right House Republicans are plotting an attempt to remove Kevin McCarthy as House speaker as early as next week, a move that would throw the chamber into further disarray in the middle of a potential government shutdown, according to four people familiar with the effort who spoke on the condition of anonymity to discuss private discussions.


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