Bond Market Insights - Wed, 23 Nov 2022

China IG was firm on Tuesday with real money nibbling at the shorter maturities of quality names. AMC’s and the leasing sector were also in demand, tightening as much as 7bps tighter. The long end as subdued. LGFVs 23’s were up 0.25pt while AT1s were down 0.25pts. Liquidity is scant for SOE perps, which are also in demand. Investment grade China property is stable as more positive news emerges on the Vanke and Gemdale new issuance.


Sino Ocean led the HY China property space down, sliding as much as 10 points on a rumour that they had missed payment on trust products. The sector was off 1-3pts.


More measures were announced to shore up the Chinese real estate sector. On Aug 29th special loans to complete housing projects from policy banks were announced. Nov 8th PBoC granted Rmb250bn to support the bond financing of private-sector real estate companies. On Nov 14th the CBIRC announced that commercial banks would be allowed to issue letters of guarantee to real estate firms with presale housing funds held in escrow. On Monday the PBoC announced plans to provide Rmb200bn in interest-free relending loans to commercial banks. The relending rate for small businesses and agriculture is 2.00%, the supplemental mortgage loan rate is 2.40% and the relending rate for carbon emission reduction support tools and equipment is 1.75%, so good support for the banks.


Today the market is opening a touch firmer. ETF and passive flows are providing much of the momentum for non-China credits. Malaysia lagged following the election. Genting dropped 3-4pts yesterday and is opening down another 1-2pts this morning, which brings it to 8pts lower so far this week. The rest of the Malay space is opening better, tracking the broader risk tone and following some demand for the long-end in New York.


In Thailand banks’ sub paper is opening 5bps tighter, AT1’s are +25cts and oil names are consolidating, with some profit taking after the 60-80bps tightening this month. In Singapore there is continued demand for Singapore Airlines, with SIASP 29s 20bps tighter this week, with dealers struggling to source bonds.


Fed officials continue to reiterate that inflation is too high and that further rate rises are warranted. Ongoing labour market tightness is also a key factor in the Fed’s ongoing tightening bias. However, San Francisco’s Daly noted that officials need to be mindful of lags and Cleveland’s Mester said she’s open to moderating the size of rate hikes. Tonight’s November PMI data will be important


US Treasuries will not be trading in Asia until Friday. Japan is closed today for Culture Day and tomorrow the US celebrates Thanksgiving.