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Bond Market Insights - Fri, 5 Aug 2022

Updated: Aug 30, 2022

After a stable start China Property saw better selling overall, led by CIFI and Country Garden in HY and longer-dated IG, Longfor Group and Vanke.

There was confusion over Sino Ocean’s intentions for their onshore bonds following efforts to deter investors from exercising mid-August puts; some talked of an exchange, others of extensions. This added downward pressure to the issuers longer dated US$ bonds which lent to a heavy tone in the distressed sector.

In Macau gaming SJM rallied 5pts as Zhuhai announced it would resume travel, private banks buying being countered by selling from real money. Other Macau gaming names were unchanged.

Flows were mixed for Asian sovereigns with ETFs buying across the board and real money now selling, particularly in the long end, curves continuing to steepen. Pakistan has rallied 6pts in the past two sessions in the absence of news.

It has been a mega week for US IG new issuance, with the weekly total busting through $56bn, helped by Mega 4-tranche $10bn deal and a slew of Yankee bank deals from HSBC, Lloyds and StanChart, totalling $8.5bn. Meta 5yr and 40yr are trading just inside launch spread, while the 10’s, 30’s are straddling theirs.

Singapore, our little red dot, was headlining the new issue news with a 50yr SGD 2.4bn (US$ 1.74bn) 3% unsecured green bonds due in 2072, yielding 3.04%, which is the longest tenor green bond issued by a sovereign to date. The bond is issued under the Significant Infrastructure Government Loan Act (SINGA) and the proceeds will be used to finance eligible green expenditure under the Singapore Green Bond Framework, which has obtained a second-party opinion from Sustainalytics.

In LATAM a small opening in the capital markets allowed Guatemala broke the ice issuing a new 7-year $500 million 5.25% coupon. The new bond was priced cheap to the curve, and it rallied a point on the day.

Amid uncertainty there is a surprising uniformity of opinion regarding tonight’s change in nonfarm payrolls. Almost everyone is predicting a 200-300k range of estimates which is well covered by the statistical noise around the 90% confidence interval of +/-110k.

Despite this consensus on tonight’s main event Asia credit traded very quietly this morning, spreads all but unchanged. China leasing paper continues better bid as does the short end of the China SOE sector.

Ouch, can I scrub my earlier comment?

That was not what the Fed wanted! Bumper increase in headline numbers, decline in unemployment, decline in participation and acceleration of wage inflation.... 75bps in September here we come


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