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Bond Market Insights - Mon, 05 Jun 2023

After a week of solid employment data there was a feeling that Non-Farm would exceed expectations; it certainly did and there were upward revisions to last month. The initial fall was met with buying as average hourly earnings YoY were lower than predicted and the unemployment rate increasing to 3.7%, but eventually sellers prevailed.

The US highlight for today and for the week the Services ISM for May, which is a survey of non-manufacturing firm’s purchasing and supply executives, we also get durable goods. The Fed is in blackout ahead of the meeting on June 14th, so no loose comments to chase. The week sees Inflation data in China, wages in Japan and industrial indicators will be watched in Germany. Bank of Canada and the Reserve Bank of Australia will meet and the consensus is for no change, although there is a possibility of another 25bp hike from the Aussies.

On Friday there were no IG new issues in the US. Over the week there were only 4 deals over the whole week for Asia ex Japan, raising $3.25bn. The largest was from HK, who issued a multi-tranche green deal. In Japan Credit Agricole became the first overseas bank to issue a Samurai bond this year. European bond sales exceeded expectations with €32bn. Look for a similar size issuance this week in Europe and it is expected that US IG will hit $20bn.

Spreads are a few bps tighter in Asia IG this morning, but there is not much follow through.

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