The high-yield sector remained on the decline, Shimao and Agile fluctuated sharp

Market Recap

Market overview: Federal Reserve Chairman Jerome Powell said he will prevent high inflation from taking root in the economy, and the post-epidemic recovery will be different from the past, and the Senate will hold a re-election hearing on Tuesday. Fed Vice Chairman Clarida unexpectedly resigned two weeks early. North Korea may have fired another ballistic missile. China's regular session calls for speeding up investment and boosting consumption. Evergrande's proposal to postpone the prepayment of bonds has been postponed to January 13. Standard & Poor's downgraded Shimao Group, saying the company's liquidity has deteriorated further.

In terms of Chinese dollar bonds, the investment-grade index fell 0.08% and the high-yield index fell 0.51%. The U.S. High Yield Index was down 0.13% and the U.S. Investment Grade Index was down 0.09%.

Investment grade: Chinese dollar bond investment grade trading is relatively light, and Japan is on vacation. The U.S. employment data was relatively strong, and the market's expectations for the Fed to raise interest rates in March increased. Investors' selling interest increased, and the active bond spread widened by 1-2bps. Technology and state-owned enterprises saw the street sell-off, and names such as Tencent and Meituan went 1-3bps wider. The financial sector is more resilient and remains relatively stable. In the newly issued market, SF Holding’s curve was active today, with the overall spread widened by 5-8bps. The newly issued bonds have a large margin for premium. The preliminary pricing areas for 5-year and 10-year terms are T5+160bps and T10+195bps respectively. , while existing bonds are trading around +113bps and +155bps.

In terms of high-yield: the high-yield sector of Chinese dollar bonds was weak as a whole, and transactions were light. Shimao Hong Kong shares rose 20% after the potential acquisition, and the US dollar bond curve also rose 3-5pt. Then Standard & Poor's announced to downgrade Shimao's rating to B-, and Shimao's curve has narrowed again. Agile weakened sharply, investors worried about potential debt rollover risks, and the curve fell again by 5-10pt. The higher-rated Country Garden, Xuhui, Logan, and Powerlong dropped another 2~3pt. According to market sources, 9 central state-owned enterprises, including Poly, OCT, China Merchants Shekou, China Resources, COFCO, Minmetals Real Estate, China Construction, Jinmao, and China Lvfa, were required to acquire 11 companies with medium and high risks through mergers and acquisitions of project assets. Enterprises provide liquidity support, including Greenland, Sunac, Shimao, etc.

Secondary Market Review

1. Secondary trading of active bonds

(1) Investment grade active bonds

Investment grade trading in Chinese dollar bonds was relatively light, and Japan was on vacation. The U.S. employment data was relatively strong, and the market's expectations for the Fed to raise interest rates in March increased. Investors' selling interest increased, and the active bond spread widened by 1-2bps. Technology and state-owned enterprises saw the street sell-off, and names such as Tencent and Meituan went 1-3bps wider. The financial sector is more resilient and remains relatively stable. In the newly issued market, SF Holding’s curve was active today, with the overall spread widened by 5-8bps. The newly issued bonds have a large margin for premium. The preliminary pricing areas for 5-year and 10-year terms are T5+160bps and T10+195bps respectively. , while existing bonds are trading around +113bps and +155bps.

(2) High-yield active coupons

The Chinese dollar bond high-yield sector was generally weak, with light turnover. Shimao Hong Kong shares rose 20% after the potential acquisition, and the US dollar bond curve also rose 3-5pt. Then Standard & Poor's announced to downgrade Shimao's rating to B-, and Shimao's curve has narrowed again. Agile weakened sharply, investors worried about potential debt rollover risks, and the curve fell again by 5-10pt. The higher-rated Country Garden, Xuhui, Longguang, and Powerlong dropped another 2~3pt. According to market sources, 9 central state-owned enterprises, including Poly, OCT, China Merchants Shekou, China Resources, COFCO, Minmetals Real Estate, China Construction, Jinmao, and China Lvfa, were required to acquire 11 companies with medium and high risks through mergers and acquisitions of project assets. Enterprises provide liquidity support, including Greenland, Sunac, Shimao, etc.

(3) Distressed plate

For other active coupons, the overall price fluctuations are not large.