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Bond Market Insights - Tues, 29 Aug 2023

The US treasury curve remained under pressure as we approached a double auction. 2yrs peaked at 5.105% before recovering into the $45bn 2yr auction, which went well with bid/cover of 2.94x. $46bn 5yrs also went without a hitch, stopping at 4.40%, the highest in 16 years. SOFR futures remain under pressure, Dec 23 (SFRZ3) hit 94.50.

Today is consumer confidence day in US, Germany and France. market players will be closely monitoring the Fed's favored inflation metric, the personal consumption expenditure index, due on Thursday. Subsequently, focus will shift to the new non-farm payroll statistics releasing on Friday.

News of the nationwide guidance on easing mortgage rules in China prompted rush to get involved in HY property, both state and private. Roadking (ROADKG) outperformed again, up +3-5pt on PB buyers. New World rallied 2 points early on, but faded back to unchanged as real money chased the bid. China IG was a couple of bps tighter.

Mongolia Mining (MONMIN) launched an exchange offer for the MONMIN 9 ¼ 04/15/24, offering a cash element of $30(principal) and a supplemental $5(fee) paid in cash as well. The remaining $70 of principal would be exchanged into the new bonds at a price of 97.00. The coupon has not yet been decided. The existing 2024 bonds traded 4pts higher to 97/98 on light turnover. MONMIN PERP remained unchanged.

The new issue market is still in the summer doldrums. Aozora Bank has mandated for a 3yr Green bond and is holding investor meetings. The People’s Government of Shenzhen is looking to issue CNH denominated 2yr, 3yr Green and 5yr Social with yields from 2.75% to 3.15%.

This morning China is opening better bid, although there is selling of AMC names due to the missing Great Wall annual report.


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