BREKKIE BOND WRAP

Daily Credit Wrap:

INVESTMENT GRADE:
Sentiment was generally firmer across Asian credit yesterday. IG spreads were about unchanged. We did hear of some profit-taking in outperforming BBB names, but it was easily absorbed by the street. The new Petronas deals traded heavy at the break as they priced much tighter than initial guidance, but steady buying throughout the day brought them back to reoffer or tighter by the end of the day. It was relatively busy in the primary space, with new deals from Hutch Ports 3yr (T+127.5) and 5yr (T+140) and ICBC Financial Leasing 3yr (T+175) and 5yr (T+190)

HIGH YIELD:
The HY market traded with a softer tone with some selling seen in the second tier Chinese property names like Yuzhou and China Aoyuan. That sector was about ½ – ¾ point lower on the day as chips continued to be taken off the table with the space continuing to be buffeted by increasing headline risk. The Kaisa complex continued to recover with bonds higher by 3-4 points. There are growing expectations that better restructuring terms may be forthcoming, though volatility is the name of the game here with both issuer and bond investors (and perhaps lawyers?) working to get the best deal in a short time frame.

Thoughts:
The strong rally in US stocks overnight and slightly higher UST yields should lend a firmer tone to the credit space today. I would not be surprised to see spreads grind tighter into the weekend, though not many people will be putting on big bets with the all-important FOMC meeting next week, where the omission (or retention) of a particular word in the statement could push the markets significantly wider or tighter. So, I say, let’s be PATIENT and wait to hear what Yellen & Co have to say. Good luck!