Outlook for the week
We view high yield bonds as more favourable given historically cheap valuations (Figure 2) and higher buffers against rising interest rates. These include the KOHSP 5.1% 27Oct2022, ESRCAY 5.65% Perpetual, and EREIT 4.6% Perpetual.
Key economic releases for the week
Last Week Summary
In Asia credit space, China Huarong took a 3-notch Fitch downgrade to BBB last Monday. ICBC also supported the company by extending a loan for the repayment of S$600mn bonds that matured last Tuesday. This came after Chinese regulators called for banks to extend support to Huarong. In the primary market, despite deal volumes dropping drastically WoW (-80%), book coverage ratios was much higher at 6.4x compared to 4.5x. Average Initial Price Guidance Tightening also increased to 32.7bps compared to 28.6bps the week before. Issuance was skewed towards the 5yr tenor, with half of last week’s deals (6 out of 12) being priced on the 5yr. US$3.54bn of bonds was issued from 12 deals: Investment Grade: US$2.4bn, High Yield: US$882mn, Non-Rated: US$260mn.