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Bond Market Insights - Thurs, 01 Feb 2024

DJIA -0.8% / S&P -1.6% / CCMP -2.2% / CRUDE -2.5% $75.85 / GOLD +0.1% $2,040 / VIX +7.8% $14.35:

Fed rates on hold, noting that the Fed “does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent." While Powell acknowledged progress on inflation, he leaned into the higher-for-longer message and admitted that a March rate cut is not consider the ‘base case’ signals openness to easing but cautioned March cut is “not the most likely case”.

US stocks slid into the close led by Big Tech following news that the US Senate intends to quickly pass legislation over child safety (META -2.5% / SNAP -3.5%). Apple, Meta, Amazon are all due to report tonight. 

 US Treasuries initially spiked amid renewed regional bank concerns. New York Community Bancorp stocks plunged 44% at the open as it cut dividends to bolster capital in order to meet the larger bank requirements which came into force when it acquired Signature Bank. The regional bank index, KRE, was down over 5%.

2yr yields slid below 4.20% for the first time since the Waller comments, but then reversed on the FOMC announcement, bouncing back towards 4.28%.

The Evergrande saga has reached another chapter with a liquidation ruling being passed by HK judiciary. Under a cross-border recognition agreement reached in 2021, Hong Kong liquidators can seek mainland assistance in taking control of a developer's onshore assets. However, the mechanism only applies to courts in three Chinese cities: Shanghai, Xiamen or Shenzhen and even so they can refuse a request if it “offends public order. So far, Chinese courts have recognized only one of five winding-up applications granted in Hong Kong courts. 

New World Development is working with Rothschild to refinance a HKD 9.25bn term loan due in June. The loan is part of a 2015 joint venture with Abu Dhabi Investment Authority (ADIA) and is secured against high-end Hong Kong hotels, the Grand Hyatt, Renaissance Harbour View, and Hyatt Regency in Tsim Sha Tsui.

China January home sales fell off a cliff with contracted sales from the top 100 developers down 33.3% yoy, or 47.7% mom. This month home purchase restrictions relaxed in tier-1 cities such as Guangzhou, Shanghai, Suzhou in an effort to counter this current trend.

China’s manufacturing Purchasing Managers’ Index (PMI) for January rose 0.2ppt MoM to 49.2%, largely in line with expectations, ending three consecutive months of MoM declines, but staying in contraction for the fourth consecutive month.


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