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Bond Market Insights - Mon 03 Apr 2023

OPEC+ announced a surprise oil production cut of more than 1m b/d, Saudi being responsible for half of that. The move may push the oil market into a deficit in Q2, a surplus was envisaged according to Vanda Insights. WTI rallied +5.3% and 2yr Treasury yields rose to 4.095% again, having been quite supported in the US session following the downward revision to the UMich 1-yr inflation from 3.8% to 3.6%. The market continues to lean towards another 25bp hike in May before pausing. There was some flattening of futures through to Dec and now a little under 60bps of rate cuts are priced in through the second half of the year

It was a mixed open as Asia credit tried to improve a couple of bps better following the firm Friday overnight session, but there was little follow through. New issues were heavy, with real money buying of the recent AIA and Korea Mining not being evident. There was some demand for Asia AT1’s from retail. Shinhan Bank is lining up a Gender-Equality Social bond for the US hours. Initial talk is for a $500mm 5yr in the T+145 area. The proceeds will support “eligible social projects solely for women borrowers in access to essential services category”. It is expected to be rated Aa3/A+.

Country Garden, which has been on a bit of a rip recently, released 2H 2022 results. Revenue decreased 14% y/y, attributable contracted sales decreased 37% y/y but they did manage to reduce gross debt by 10% compared to the previous half year to US$39bn. The firm exited loss-making projects, cutting GFA by 34% y/y. Credit investors are taking it more positively than equity investors, the COGARD curve was marked higher by about another 2pts

Sino-Ocean is also in the news. It was downgraded was two notches by Fitch, to B+, the US$ 600mm perpetual was downgraded to B-. They drew down CNY 7bn from the CNY 130bn of new credit lines, preparing funds for CNY 2bn of private notes and Sino-Ocean Capital has also been hit by HK winding up petition from Great Wall. Bloomberg writes that support from China Life, a major shareholder, could be crucial to keeping Sino-Ocean afloat.

Taiwan is closed until Thursday but is still of interest. Taiwan's Tsai Ing-wen will speak with a Republican-led group of lawmakers this week on her way home from Guatemala. She's also expected to meet House Speaker Kevin McCarthy.


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