FIXED INCOME

FIXED INCOME NEWS OF THE DAY

04/06/2024
 

Last Friday ended the last trading day of treasuries on a quiet note with just Chicago PMI data release and early market close.

Treasuries were mixed, curve steepened on weaker new orders and employment.

CREDIT MARKETS

EUROPEAN AT1

AT1 closed unchanged to -0.25pt before Christmas holidays on very light volumes. The resumption of AT1 issuance in November and easing of inflation fueled a market rally into year-end. A benign market backdrop is set up for AT1 in 2024 thanks to peaking rates, attractive valuations and limited supply risk. 

ASIA HIGH GRADE

In Asia IG, market rally intensified after global rates stabilized. Investors were in rush to chase high quality credit names towards year end. Extension of duration has become a rising trend in flows. While Asia issuance shall pick up marginally in 2024, the supply risk will be limited – local funding costs remain lower than dollar funding cost. The supply will be skewed to IG with financials remaining the biggest issuers due to their natural fundings for overseas operation. 

ASIA HIGH YIELD

In Asia HY, even though the worst current default cycle is likely behind us, rotating from IG to HY remains an uncertain investment strategy for many fund managers. A sluggish recovery in China property sector shall continue to weigh on the momentum in HY. HY issuance is likely to stay muted given general risk aversion among investors.

Source Bloomberg as of 2 jan 2024.