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Bond Market Insights - Mon, 13 Feb 2023

Asia IG was mostly about Korea new issues on Friday, China IG was subdued with real money side-lined ahead. China HY continued to slide another 1 to 2.5pts, Country Garden being bellwether. Distressed property was unchanged to -1pt, with selling of SUNAC and KAISAG. HY industrials also tended weaker, led by Fosun and West China Cement.

Asia sovereigns widened 3bps to US Treasuries as the market sank. ETF’s and real money were the main sellers, with local banks and insurance companies picking up some of the slack.

In the frontiers there was small selling of Pakistan and Mongolia, which was enough to take them down a point. Pakistan was from a bout of profit taking after the 3pt rally on Thursday, a knee-jerk reaction to the IMF headlines hit. Sri Lanka continues to feel firm.

Adani complex was 1pt lower, tracking the move lower by some of the group’s equities after MSCI reduced the weighting for 4 of the listed companies due to the limited free float available. The move lower brought out some Asian sellers, but flow has been relatively light in the last few sessions. Moody’s affirmed ratings on eight Adani entities and changed outlooks on four issuers to negative from stable considering higher funding costs due to current situation (Adani Green Energy, Adani Green Energy Restricted Group, Adani Transmission Step-One Limited and Adani Electricity Mumbai Limited).

Korea secondary is still firm, the recent primary issues are heavy, Pohang and KDB both fading 3bps. There are buyers for Korean Bank Tier 2 subordinated paper. Real money was selling Thai financials, spreads 5bp wider and perps 0.5 to 1pt lower.

Indonesia’s Lippo Malls (LMRTSP) paper was down 6pts, following the downgraded to Caa1 by Moody's. Lippo Karawaci’s Theta Capital (LPKRIJ) was down 2-3pt on real money selling, although there was some fund buying of bonds with lower dollar pricing. Lippo Karawaci is the parent company of Lippo Mall, which manages and operates shopping centres and retail spaces within Lippo Karawaci's developments.

Asia opened 2-3bps wider this morning and was met with good buying interest of China IG across the maturities, but not enough to pull spreads back.

In New York UST’s faded 4bps initially after UK GDP recorded a flat qoq, then got hit again by the strong Feb University of Michigan readings. UST 10yr yields were up +7.8 bps at 3.739%; 5-30s steeper by +2.5bp to -10.9bps. US IG was 2-5bps wider, although liquid recent new issues traded tighter on the back of better equities. This week the market expects another $30-40mm of primary issuance.

US CPI will be the highlight this week, with some expecting both headline and core to come at +0.4%mom, boosted by fuel prices,

Hong Kong is issuing its first tokenized green notes. The beneficial interests will be recorded on a blockchain-powered platform provided by Goldman. The arrangers are Bank of China, Credit Agricole, Goldman Sachs, and HSBC. Hong Kong's aims to become a centre for digital-asset capital and a hub for sustainable financing.


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