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Bond Market Insights - Tues, 17 Jan 2023

Asian bonds continue to creep better with China data being better than market consensus despite the slowdown in growth rates: Dec retail sales growth -1.8% YoY (est. -9.0% YoY); Dec industrial production growth +1.3% YoY (est. +0.1%); 2022 fixed investment at +5.1% (est. +5.0%) and most importantly, 4QFY2022 GDP +2.9% YoY (est. +1.6%).

Chinese regulators plan to offer as much as RMB160bn (USD24 billion) of refinancing support to “high-quality” developers this quarter, according to SCMP. RMB80bn will be through AMCs, such as China Huarong and its peers. ICBC Shanghai Branch agreed to provide RMB240bn of credit facilities to 16 Shanghai local property developers

Evergrande announced PWC’s resignation after FY2023 audit disagreement. The firm has also been discussing a restructuring proposal with creditors that includes two options for extending payment deadlines on offshore debt.

One option would entail instalment payments over a period of as much as 12 years. This would be done by tender, issuing new debt to replace the old. Coupons would be set in a range with a low end of around 2%. The other would be a share swap into its HK listed companies via new hybrid bonds, such as convertibles. Maturities would also be extended in this option, but for a shorter period with coupons set at around 6-7%. These are still at discussion stage,

The Bank of Japan meets tomorrow which will be closely watched. Will they announce an immediate change to the easing programme, or will they review the policy in 6 months? The BOJ continues to control longer rates and has already bought a record amount of JGB’s this month. They bought JPY11.61tn in the last 3 days, which is equivalent to 1.8% of Japan’s GDP.

Japan’s biggest trade union will ask for a total pay increase of 5% in the upcoming negotiations, which would be the highest hike in 28 years. BOJ is still talking of needing wage growth to sustainably hit the 2% inflation target.

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