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Bond Market Insights - Mon, Apr 11 2022

The sell-off in fixed income continues today ahead of this week’s March US CPI data and the April ECB meeting. This morning there was selling from north Asia real money in 10yr treasuries which set off stops forcing the market through Friday’s NYC lows. The US Ten-year yields climbed through 2.77% for the first time since March 2019, now yielding more than 10yr China government debt for the first time since 2010. Historically the narrowing China-US interest rate spread is often accompanied by the depreciation of the currency, but this time the RMB is stable.

Emerging market sovereigns were mostly down, as the repricing continues. Philippine 2047's were down 2.25pts today, the curve widened between 2 and 7bps.

There was selling in the China TMT sector this morning following the announcement that China will remove data monopoly at platform companies over the weekend, to prevent them from restricting competition, although spreads remained resilient. China IG turned weak at the end of the session spreads moving 5-10bps wider. AT1 subordinated bank debt was down ¼ to ½ point.

South-East Asia IG credits opened weak and continued to deteriorate over the session ending as much as 8bps wider, led by the 10yr sector. The retail bid is slacking, weighing on recent out performers such as Singapore Airlines, which tightened 30bps over the past few weeks.

News that Zhenro Properties had defaulted on two US$ bonds caused China HY property to give back some of recent gains. Initially hit by trading accounts, but being joined by real money and private banking clients as the morning session progressed pushed prices down between 2 and 5pts. Non property HY names were down by 1-3 pts, but HK HY corps were unchanged on back of better buying from PBs and real money. China’s offshore corporate-bond defaults have climbed to $8 billion this year (Bloomberg), including 25 USD-denominated bonds and one HKD bond. Onshore defaults are reported to be at $3.1bn equivalent.


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