US markets remained closed yesterday to celebrate its 245th founding anniversary. US 10Y Treasury yields were up 2bp at 1.44bp. Meanwhile, European bourses closed higher with Eurozone business activity surging to 15Y high in June with the Markit PMI for the Eurozone at 59.5, up 2.4 MoM and above flash estimates of 59.2 – FTSE, CAC and DAX closed 0.6%, 0.2% and 0.1% higher respectively. Banks up 1.8% led the gains, while health care down 0.4% dragged. EU main and crossover CDS tightened 0.2bp and bp respectively. Brazil’s Bovespa was down 0.3% despite its PMI coming at 53.9 up from 48.3 last month. OPEC+ postponed the much awaited talks to resolve the standoff between Saudi and UAE over extension of the duration of oil production cuts as UAE seeks better terms. UAE’s PMI slipped from 52.3 in May to 52.2 in June while Saudi saw the fastest rise in employment since November 2019. UAEs Saudi TASI ended 0.3% down while Abu Dhabi’s ADX was up 0.7%. Singapore’s private sector also stagnated in June after witnessing a strong growth in May – its PMI fell sharply to 50.1 in June from 54.4 last month. China’s Caixin Services PMI fell to 50.3, a 14-month low. The pace of expansion of Hong Kong’s private sector also eased in June even as demand and output increased for the third month running – its PMI came in at 51.4 in June vs. 52.5 in May. Shanghai opened lower by 0.2% as the Beijing’s crackdown on Didi expanded to three more tech firms. Nikkei and Singapore’s STI were up 0.5% and 0.3% respectively while HSI was broadly flat. Asia ex-Japan CDS spreads were flat.
Zhejiang Expressway hires for $ bonds
China Modern Dairy Holdings hires banks for bond offering
Shenwan Hongyuan Securities hires for $ bonds
Xiaomi hires for $ offering, including green tranche
Mitsubishi hires for $ 5Y bond
Local government financing vehicles or LGFVs are debt-issuing entities set up by local governments in China to fund infrastructure and related projects. LGFVs came into existence because local governments were prohibited from raising debt directly. Hence, these local governments set up off-balance sheet entities known as LGFVs. LGFVs have become popular over the past decade and are regular issuers of Chinese yuan and US dollar bonds. While these issuers are backed by local governments, there were concerns among investors about their ability and willingness to repay debt driven by events in the past when LGFVs defaulted on their bonds. Recently, yields on Chinese LGFV bonds have tightened in the last three months according to CreditSights (story above).
Nivard Cabraal, Sri Lanka’s state minister for money and capital markets
Sagarika Chandra, primary sovereign analyst for Sri Lanka at Fitch Ratings