20230711-招银国际-Fixed_Income_Daily_Market_Update_5页_836kb

Summary of Fixed Income Market Update - July 11, 2023

Market Overview

The market showed a risk-on bias this morning, with Asian Investment Grade (IG) bonds experiencing steady buying, particularly in Technology, Media, and Telecommunications (TMT) and State-Owned Enterprises (SOE) names. New issues like HKLS '33 and KORHIC '26 saw tightening in spreads, while markets like China and HK/Korea showed mixed performance. Corporate IG papers like CNOOC/CHGDN and China SOEs were well-bid, but broader Asian IG sentiment remains tepid due to weaker-than-expected China CPI/PPI data and global economic headwinds.

China Market Details

• Property Sector: Regulators extended loan relief measures from December 2023 to December 2024, aiming to expedite project deliveries. This includes extensions for outstanding loans and support for developers, but demand remains weak under the economic downturn.
• Economy: Deflation is entrenched amid weak consumer demand and supply competition. China's CPI growth dropped to 0% in June, well below expectations, and PPI further declined. Forecasts were revised downward: CPI growth for 2023 at 0.8% (previously unspecified) to 2024 at 0.8% to 2.1%, and PPI growth at -2.7% to 1.3% for 2023 and 2024. Policies include potential further credit loosening and stimulus to combat deflation risks.
• Bond Performance: Notable movers included DALWAN '23 rising sharply, while COGARD '24 fell. In SOEs, CNOOC/CHGDN papers were better bid, and in Chinese SOEs, the front-end of T2s/leasing papers remained firm with balanced flows.

Macro News Recap

US markets rebounded with S&P and Nasdaq gains, amid focus on CPI/PPI data. The dollar retreated to its lowest since May, and Treasury yields fell across the board. Globally, China's weak data and Fed tightening concerns weighed on commodity prices and sentiment.

Key Developments and Issuances

• Trading Desk Comments: Highlighted price changes, such as DALWAN '23 up ~6.7% and COGARD '24 down ~5.9%. Flows were modest in Asian LGFV papers, with front-end spreads widening slightly.
• New Issues: Offshore Asia saw Doosan Enerbility (300mn, 5.5%) and Hongkong Land (400mn, 5.25%). Pipeline includes CICC and Korea Hydro & Nuclear Power issues.
• Other News: Onshore Chinese credit bonds saw high issuance volume (e.g., RMB77bn yesterday), while delays and defaults impacted specific companies like E-House and DALWAN.

Analyst Insights and Forecasts

Chinese property support is limited by weak demand; policies focus on delivery urgency rather than market revival. Economic outlook emphasizes prolonged deflation due to low output gaps and deflationary pressures, with potential for further fiscal and monetary easing.

This report details market dynamics, analyzes risk factors, and provides forecasts.