Outlook for the week
We view high yield bonds as more favourable given historically cheap valuations (Figure 3) and higher buffers against rising interest rates.
Key economic releases for the week
Last Week Summary
Inflationary fears drove an equity markets selloff last week as the US reported a spike in consumer inflation by 4.2% in April. 10yr US Treasury yields widened to 1.65%. Asia primary debt market activity picked up with high yield issuers picking up the pace, contributing US$6.03bn (or 72.7%) of last week’s total issuance in total. However, high yield issuers had to pay up in terms of new issue premium (NIP) to price deals, paying an average of 7.72bps of NIP to tap the dollar bond market. Real estate issuers were active, pricing 10 deals with an average order book of 4x and an average initial price guidance (IPG) tightening of 33.6bps. The only investment grade issuer within real estate sector this week, Country Garden, tapped its 3.125% 2025 notes at T+230bps and decided against pricing the 10yr tranche after announcing final price guidance at T+250bps.