CNH market bounces back in April with 35bp yield compression

It's the biggest in 20 months.

It was noted that the CNH market had a robust recovery in April.

According to a research note from HSBC Global Research, the average yield of Dim Sum bonds fell 35bp, the biggest monthly decline since July 2013 (the pick-up after the EM asset sell-off and China credit crunch).

As a result, the total return (in USD) of overall Dim Sum bonds erased the 0.2% loss in 1Q15 to record a 1.1% gain year-to-date (YTD).

Here's more from HSBC Global Research:

Risk appetite improved significantly. High yields have led the rally so far with select property names up 2-3pt in cash points, such as FUTLAN’16, PWRLNG’16, AGILE’17 and LNGFOR’18.

Earlier beaten-down FTHDGR’16 surged about 7pt in clean price, in tandem with the surge of its USD peer. This helped to narrow the gap between high grade and speculative grade.

On the back of this year’s second RRR cut on 20 April and the USD rally’s temporary pause, offshore RMB liquidity improved, with the average CNH HIBOR rates (including 8 tenors from overnight to 1-year) down almost 100bp in the past month to 3.8% on 30 April.

Meanwhile, the 1-year USDCNH CCS rate also hit our target of 3.2% in late-April, while the 1-year bank CD offer rate fell to our forecast range of 3.6-3.7%.