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Bond Market Insights - Thu, 24 Nov 2022

Global markets are nothing if not fickle. After being buffeted in recent days by speculation and concerns that the Federal Reserve will be persistent with its rate hikes, sentiment did a swift 180 as U.S. data provided a dovish Thanksgiving feast

The latest Fed minutes minutes the recent narrative from Cleveland Fed’s Mester and San Francisco’s Daly. who have both seemed to advocate slowing the pace of tightening over the next couple of FOMC meetings.

Futures market moved to price in a more modest 50bps for the December meeting. The U.S. data that was released last night has some commentators looking for a terminal rate of 4.75% by 1Q2023. S&P Global U.S. manufacturing PMI was 47.6 for November, down sharply from 50.4 in October. This id the first sub-50 print since June 2020.

Wednesday was a firm day for China IG, buyers piling into the front-end benchmarks and high beta bonds. AMC, leasing and HAOHUA moved another 5-7bp tighter. Real money is switching into new issues . China HY credit is looking for more stimulus and support from the Chinese govt, and US$ bonds were pulled up by a good rally in onshore bonds. Country Ga rden was up 3-4 pts.

There are no US treasuries trading today but the tone is still firm. Non China names tightened as much as 15bps this morning, with buyers looking for duration. ETF and passive flows have slowed and their place has been taken by others desperate not to miss out. Even Malaysia seems to be on a firmer footing with Genting up another 1.5 points this morning. The market is now only 1 point down on the week, having printed at down 6pts. Thai oil names have pushed 10bps tighter on average and AT1’s are up 25 to 50bps.

Happy Thanksgiving to all our American readers.


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