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Bond Market Insights - Mon, 12 June 2023

China stock markets took cheer from the Caixin manufacturing PMI on Thursday last and the rally continued through Friday, with real estate being the biggest outperformer. China high yield was strong, some issues up 3pts, hedge funds and private banks providing the bid. Macau gaming was up around 0.75pt, led by Wynn Macau and Studio City Finance. Saying that Resorts World Las Vegas (RWLVCA) and Genting's GENMMK bonds have broadly outperformed the Macau Gaming complex by 1.5-2.5pts since April 13th, after RWLVCA announced its amendment & extension of the bulk of its Existing Senior Secured Credit Facilities with an outstanding balance of $1.252bn due in April 2024.

Korea IG spreads held their bid, with buyers of BBB names. Short-dated call Tier 2 bonds have been in demand over the past week while the much of the 5/10yr is languishing. Hynix is an outlier tightening 15bps through last week. GS Caltex delayed their new $ issues as funding rates were better in the domestic market. They are expected to dip their toe into the water again after the Fed meeting. SK Broadband (A3/A-) is expected to launch either a USD $3y or 5y benchmark, meetings starting on 12th June.

We are staring into a week of key events: CPI on Tuesday, FOMC on Wednesday, ECB Thursday and BOJ on Friday. The only game in town recently has been the surge in Nvidia and the tech crew, supported by volumes not seen since Feb 2021. VIX has been crushed, now trading with a 13 handle, last seen in Feb 2020. Volumes in fixed income are paltry. Conviction is very low. Beware the ides of….. June?

This lack of conviction is evident in the speculation over the FOMC meeting, split between 1/4pt hike or a pause and a wait see strategy. Powell’s “I don’t know” response continues to overhang decision-making, so we will continue to focus on data releases.

KRE US, the SPDR S&P Regional Banking ETF which was often referred to in the recent turmoil caused by Silicon Valley Bank, continues to consolidate in the mid-40’s. Deposit flight has slowed, but it is worth noting that the average rate paid on $17tn US bank deposits was only 1.4%. Banks will have to show some generosity, and feel some pain, to compete with the burgeoning money market funds.

Azure Power Global, the NYSE listed Indian solar power producer plans to solicit consent from its USD bondholders to amend some of its bond covenants pertaining to disclosure obligations. Azure seeks to avoid triggering a potential event of default due to delays in filing its audited results for financial year ending March 31 2022 according to sources, Bonds are down about 3.5pts this morning


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