Jerome Powell, Federal Reserve Chairman
“Participants generally viewed that so long as the economic recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate.” “The test of substantial further progress for employment is all but met.” On the effect of Evergrande on the US economy, “it’s something they’re managing,” Powell said. “In terms of the implications for us, there’s not a lot of direct U.S. exposure.”
In a statement by the Federal Open Market Committee (FOMC)
“If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted.”
The Fed’s projections are “probably a little bit more hawkish than many would have anticipated, basically acknowledging that should the economy continue to grow as we have seen, it would warrant a tapering to occur.” “You could say it’s a tentative tapering announcement even though they did lower their 2021 GDP forecast.”
“I’d be naive to think that the turmoil in the market doesn’t have the potential to have second-order and third-order impact. Clearly with the changes that are taking place in the Evergrande situation it’s concerning.” “There is a potential for second and third-order impact, particularly on the capital markets and the bond markets, and we’ve got to stay close to that.” “I don’t think the regulatory reform that we see necessarily is wholly unexpected because there have been some strong signals, particularly around shadow banking, around the commercial real estate market, that some of the regulatory regime was going to change.”
Li Kai, founding partner of bond fund Shengao Investment
“Usually it will involve extension, payment in installment or a reduction in the coupon,” Li said. “This is one of the ways to avoid defaults by distressed companies.”
Daniel Fan, a credit analyst at Bloomberg Intelligence
“Evergrande might have arrived at some kind of standstill with onshore holders.” “They might have asked them not to act, pending for negotiation for a rescheduling or something of that sort.”
Victor van Hoorn, executive director of Eurosif
“That is an issue of credibility of the system at a time when Europe is trying to be the first jurisdiction to have some sound, robust sustainable finance rules in place.”
Alexander Lehmann, former lead economist for the European Bank for Reconstruction and development
“A sovereign exposure is not carbon neutral, and some less so than others,” Lehmann said.
On the era of Gulf jumbo bonds likely to be over – Hani Deaibes, head of debt capital markets for the Middle East and North Africa at JPMorgan
“Governments are trying to spread issuance through the year, trying to optimize pricing. They are now well established and have that flexibility.” “With lower financing needs, you don’t have to de-risk funding via large transactions and as such less need to do jumbo trades”. “Saudi Arabia has been gradually reducing its funding requirements, Abu Dhabi is in a very good position, Qatar has done the bulk of its large capex”, said Deaibes. “Maybe Kuwait is the only one that – when they eventually get approval to raise debt – may decide to do a jumbo transaction since they haven’t accessed the market since their inaugural transaction”. “We’re now in the period of refinancing of those large deals that came out in 2016, 2017, so issuance volume should be sustained by refinancing and issuances from new entities as the market continues to evolve and irrespective of a reduction in fiscal deficits, at least for the coming few years”, Deaibes said.