Bond Market Insights Wed, May 11 2022

All eyes will be on U.S. April inflation report, expectations being a monthly increase of 0.2% m/m, vs 1.2% m/m last month. Annualised that would equate to 8.1% y/y, down from 8.5%. Part of this fall can be attributed to the softening of oil prices, mainly due to the government's opening of the Strategic Petroleum Reserve.


The 3yr US Treasury auction went well, bid to cover 2.59x versus the 6 month average of 2.43, dealers taking only 20% of the auction, the lowest since 2013. Tonight we have a $36bn 10yr auction, will we get a 3% coupon?


China inflation for April was reported higher than expected this morning, PPI at 8% and CPI at 2.1%, raising concern over imported inflation with the weaker yuan.


Tuesday was weak for China HY, most property bonds down between 0.50pt to 2.50pts led by higher dollar priced bonds like CIFIHG and Roadking. Flows were driven by real money selling and PBs buying.


Country Garden bonds fell as much as 7pts due to onshore news concerning the freezing of its escrow account, despite assurances that the measures imposed by regulators in the southern city of Fuzhou were lifted.


China IG was as much as 7bp wider as UST’s rallied, while AT1s slipped 0.5pt. SOE perpetuals had an interesting day as the State Power Investment Corp withdrew the redemption of $500mm POWINV 5.8 perp, which had been announced on April 28th. The bonds bounced nearly 3pts.This boosted speculation of a similar event for HAOHUA 3.9 perp.


New Issues have picked up. Property company Changsha Jinxia New District issued a small deal backed by with a SBLC provided by Bank of Changsha. CCB London issued US$1bn 3yr and CNH 1bn 2yr. Orient Securities (DFZQ) saw $800mm of interest for today's 3yr bond and Industrial Bank got $2.6bn of interest for the 3yr fixed green bond..


Korea Expressway is also touting a 3yr US$ issue at T+120, which looks quite cheap versus Korea Water Resources, KORWAT 25 is trading around CT2+80.


This morning Asia credit started unchanged, despite selling overnight. Sri Lanka fell as much as ~3pts, Onshore reports of an order to shoot at protestors destroying public property prompted selling from hedge funds and real money, this was countered by fresh buying as the long end slipped below 40.00. Pakistan and Mongolia continue to feel heavy, driven primarily by longer end.