RMB Depreciation Offered A Squeeze On Asian Dollar Bonds: UBS

The trend of RMB depreciation helped dampen the USD bond supply as it raises the costs of issuance relative to domestic funding in China, particularly for issuers without USD cash flow or assets, notes UBS analyst. Edwin Chan said in his April 19 research note titled “2Q16 Outlook: The dynamics may start to reverse” that he downgraded China IG SOEs to Neutral from Overweight on potential ratings actions and supply.

RMB depreciation: Technicals underpinned resilience of Asian dollar bonds

Chan points out that Asian dollar bonds haven’t performed very poorly YTD. He notes that besides returning 3.2%, they demonstrated relative resilience against rocky markets at the start of the year, including the sharp RMB depreciation. The UBS analyst states that credit spreads...