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

• Mon, 24 May: SG: CPI Core (1:00PM)
• Tue, 25 May: SG: GDP (8:00AM), SG: Industrial Production (1:00PM)
• Thu, 27 May: Earnings: OPTUS FINANCE PTY – Bef Mkt, SINGAPORE TELECOMMUNICATIONS – Bef Mkt, US: GDP (8:30PM), US: Core PCE (8:30PM)

Last Week Summary

The 10yr treasury yield spiked to a high of 1.68% on Wednesday on the back of better than expected jobless claims, before settling down at 1.63%. However, new issue activity in Asia was heavily subdued, with the number of deals printed down 67% WoW. The weekly volume printed also dropped significantly by US$5.78bn to US$2.018bn. With a quiet market, average initial price guidance tightening decreased significantly as well, falling 15.8bps to 18.9bps. US$2.018bn of bonds was issued from 7 deals. Breakdown: Investment Grade: US$1.416bn, High Yield: US$322mn, Non-Rated: US$280mn.

• China Local Government Financing Vehicles (LGFV) issuers were active last week with US$780mn issuance volume in total from 4 issuers. Nanning Communications Investment Group made its debut in the dollar bond market issuing US$300mn of 3yr senior unsecured bonds at 3.5%. The deal tightened 40bps from the initial price guidance, one of the most aggressive tightening last week. The issuer is one of the eight major operators of state-owned assets of the Nanning Municipal Government, involved in urban planning and construction.
• United Overseas Bank (UOB) raised EUR750mn through a covered bond deal, Singapore’s first covered bond for the year 2021. The deal tightened 2bps from IPG to price at mid swap+10bps, yielding 0.124% with a coupon of 0.1%. Majority of allocations were out of Asia, with banks taking up 37% and central banks 33% of total allocations. UOB has been an active issuer in the covered bond market, being the first in Singapore to issue EUR covered bonds in 2016.
• 5 outstanding mandates remain from last two weeks.

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