Brekkie Bond Wrap

We had a weak start to the week as fears of a Greek default and exit from the euro zone weighed on broader markets.  There was better selling across all sectors.

In IG, we opened 2-3bp wider  and remained soft, although we began to see some selective  demand for high beta and underperformers at the day’s wides. Tech names in contrast remained heavy, led by BABA, with little interest to add at the wides.  Elsewhere of note, the Korean space is seeing good two-way flow into the widening.  The recent Woori AT1 is holding up relatively well despite the back up in rates and weak macro environment.  They just traded at 98.75 in the street as I am writing this.

In HY, there was a similarly weak start to the week, with bonds generically down 0.25 – 0.50 point.  Indonesian paper underperformed with some issues down 1 pt.  Chinese property bonds were 0.5 point lower on PB profit taking after the recent good run.  In the industrial space, China Hongqiao dropped at much as 2 pts on news of the resignation of its auditor though bonds did recover to close down 1 pt.  In India, Vedanta added another 1 pt yesterday.

Greece-related concerns will likely weigh on the credit markets for another few days with no solution in sight.  Having said that, the European economies are in a much more prepared state than in 2011, and widespread contagion is unlikely.