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Bond Market Insights - Tues, Apr 12 2022

The soft tone continued in Asia Credit this morning. Price movements are bond specific around flows due to a lack of liquidity. Short dated bonds are in demand, with real money looking for SOE’s and TMT’s after the recent widening. China IG was 2bps wider in the longer end, India widened 5bps although Reliance Industries long dated bonds were as much as 10bps wider.

China HY followed Country Garden and CIFI which opened down 2pts. There was better selling of names like Sunac, Times China and China SCE Group through the morning. Bonds from Seazen Group were down 4pts. On the good news front, Redsun properties managed to redeem the $259mm REDSUN 9.95 04/11/22.

New issues abound. Yesterday MUFG priced a $2bn 3-tranche offering in New York at about 10bps wider than secondary bonds, Korea Mining issued $425mm 5yr at T+135 and there was a small, sustainable deal for Foshan Gaoming Constructions Investment at 3.5%. Mandates were issued for Bank of East Asia subordinated T2 notes and seniror notes for CITIC Securities and Yiwu State-owned Capital. This morning Korea Water Resources and Yunnan Energy have joined the fray.

Mirae Asset and Towngas Smart Energy are both looking at the sustainability- linked bond sector (SLB). SLBs are forward-looking performance-based instruments. Issuers commit explicitly in the bond’s documentation to future improvements in sustainability outcomes within a predefined timeline.

Sovereign bonds widened, led by Indonesia as Philippines had been the worst performer on Monday. There is still support for the long end of INDON as yields rise. Sri Lanka just announced that all outstanding payments to bond holders would be suspended. Talks will commence with the IMF as the government wants to avoid a hard default. US Sri Lanka bonds will now be trading flat of accrued. Prices have held their ground with some real money accounts adding, having been underweight and some distressed players entering the market.

Keeping with EM themes, LATAM inflation figures for March are pushing higher. Brazil CPI was 11.3% y/y, the highest increase since 1994 when the government was struggling to contain the runaway hyperinflation of the early 1990s. Paraguay came in at 10.1% y/y, mostly due to energy prices. The National Legislature is debating whether to approve a $100 million line of credit to the national oil company (PetroPar) to subsidize diesel prices. Energy prices spiked 188% in Turkey, aggravated by the devaluation of the Turkish Lira. The trade deficit equated to $26.4 billion in the first quarter, compared to $11bn in the same period last year.

Tonight the $34bn US 10yr treasury auction falls on CPI day. Estimates for the headline rate are running at 8.4% y/y and 1.2% m/m, this will be the first time inflation has been above 8% since 1982. We also have FedSpeak from Brainard.



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