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Bond Market Update - Wed, 29 Mar 2023

The fortunes of KRE US, the SPDR Regional Banks index ETF are being closely watched to determine market direction. Yesterday the ETF consolidated, dipping to fill a gap left on Monday. US equities followed suit as did bond prices. 2yr traded in a 12/32 range, which is almost a stall in the recent volatile environment. Good support was offered by the 5yr Treasury $43bn auction, which came at the session lows.


Data included a solid showing in the US Conference Board Confidence, up 0.8pts to 104.2 in March, while the consensus had been for a fall. US house prices were down 0.4% mom in January, seventh consecutive decline. But the pace of decline is slowing: 3-month annualized down - 3.6 compared to -7.2% in September.


US IG focused on new issues, maintaining around a $10bn run-rate, yesterday this was from 10 different issuers. In Asia today Korea Mine Rehab price talk is T5+210 following the good performance of the Korean Oil issues; Bank Mandiri eventually priced $300mm 3yr at T3+183, from an initial price talk of +225. The new AIA 33s is trading 15bp tighter than launch spread with continuing strong regional demand. The Hyundai Capital America deal sees buyers of both the 3yr and 7yr, but the 5yr is struggling slightly. Today Sumitomo Mitsui Trust Bank has mandated for a 3-5yr Euro denominated covered bond.


In secondary spreads continue to tighten. There has been consistent selling from ETF sellers so far this week, which is being readily absorbed. There has been good support for the Singapore T2s and, as we pointed out yesterday, DBSSP 3.3 PERP AT1 continues to outperform with buying interest taking it to levels seen before the recent debacle.

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