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Bond Market Insights Tues, May 10 2022

The US will auction the regular cycle of 3yr, 10yr and 30yr bonds this week, creating an opportunity for those that need duration at 4-year high yields. The CPI release on Wednesday and much more Fedspeak will keep the market on edge.

Core EGB markets will see around $18-$19bn of supply.

Expect a surge in corporate new issues. Few non-financial names have come to market post earnings, due to the risk adverse market. SSA issuers are also expected to come to market following recent holidays that kept Asian investors side-lined.

Overnight the UST rally was led by the short end and has prompted further gains this morning, 10yr yields rallying another 5bps.

China credit has not kept pace so far today, widening 5bps, as more selling in New York of 10-30yr TMT and SOE bonds weighs on the market. China HY is opening 1-2 pts lower. The rest of Asia is more subdued, although dominated by sellers, wider 2-3bps.

Liquidity is an issue across markets, as pointed out by the Federal Reserve who highlighted US Treasuries and equity index futures. Changes in regulations and procedures, such as buy-ins, have made it very difficult for dealers to set up tactical shorts, which would provide pockets of buying interest as the markets fall away. Unintended consequences etc. There is an old bond trading adage, “sell when you can, not when you have to..”

A quick look at HY China, where China’s fourth largest developer by sales, Shimao Group, missed a payment on CNY 980m trust product arranged by Sino-Australian International Trust. 77% of the sector is priced below 60 cents on the dollar, 57% below 25, while 15% trades between a cash price of 25 to 40. Hopes are that Country Garden will lead a property recovery, helped by a follow through of the vows of government support.


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