Bond Market Insights - Thurs, July 7 2022

Volatility in markets has slowed any pick-up in activity since the holidays. There was real money selling of China HY property names and industrials such as Roadking and CIFIHK, Fosun and China Oil. Distressed names were mostly unchanged in the offshore market, but onshore PWRLNG 34D traded 32 pts lower to 49 and COGARD 1.69D was 10pts higher to 67, according to Wind Information, the China data provider. Today markets are opening a touch better following a firm session overnight, IG spreads closing 2-5bp tighter than Asia close as rates sold off after the strong ISM Services Index, which remained stubbornly high at 55.3.


Holders of Guangzhou R&F bonds are set to decide between its proposal to extend the maturity of 10 USD bonds or, if that fails, to role them into a 5.5% note due in 2028. Other troubled property companies have been slow to give such clarity to investors, so this will be closely watched.


Times China is also in workout mood, trying to persuade onshore investors to exercise only 10% of their puts as they offer to pledge a transit orientated development to secure the bonds. Ronshine failed to convince their investors to put only 15% of their holdings and ended up extending two onshore bonds earlier this week as it warned that it may miss the expiration of the missed coupon grace period on RONXIN 8.1% 6/23 and RONXIN 7.35% 12/23,


For the most part global credit is following the same price action, with a few exceptions. In Argentina the market plunged on Tuesday, as investors baulked at the replacement of Economy Minister Martin Guzman with VP Kirchner’s nominee, Silvina Batakis. Argentina 2035s dropped to 20, a yield of 25%. Batakis tried to calm the market by promising to adhere to Guzman’s economic plan, but with Kirchner’s heterodox policies now in the dominant position access to the international capital markets will be limited.


Vietnam continues to recover, the economy grew 7.7% y/y in the Q2/22, the fastest growth rate in 10 years. Agriculture, forestry, fishery, manufacturing and construction led the expansion. The economy also benefited from multinationals moving from China’s rising labour costs and mobility restrictions. Trade has jumped 16.4% y/y year-to-date, Exports are up 17.3% y/y, imports up 15.5% y/y. Conduit Asset Management’s Vietnam equity fund is worth considering for access to this market.