Brekkie Bond Wrap

Daily Credit Wrap:

Investment Grade:
Flows were mixed across the Asian credit space with a firmish tone. The recent Petronas bonds continue to be actively traded with the 25s closing 158/156 (unchanged). Indian credits continued to see good demand with buying seen in Corps and Oil names, pushing spreads 2-3 bps tighter. The primary market came to life yesterday with HSBC, BOC Aviation and Hyundai Capital issuing a total of US$3.4b. The HSBC COCO is trading well, with a last quote of 102.25/102.50. Hearing allocations were very severe as the final book was in excess of US16b!

High Yield:
We saw a similar strong tone in HY names, with bottom-fishing in the some of the recently beaten-up names like Yuzhou. Trading in the Kaisa space has been quiet after the coupon misses of the 2017 and 2018 bonds. The market is still waiting to see if the company will revise the bond restructuring terms after the response from the bondholders’ committee. Elsewhere, Indon and Indian HY corps were also bid higher.

With FOMC out of the way, we will go back to data watching. With Fed still trying its best to be accommodative, I think a June lift-off is looking less and less likely. We should be less obsessed with the timing of the first hike, but rather focus on the trajectory of hikes. It seems that the Fed will keep subsequent hikes gradual, so as not to risk hurting the US economy. Fed officials’ speeches seem to suggest that they view the risk of hiking too fast far outweighing that of a more measured tightening path. That should be broadly supportive for risky assets.