Asia equities turned green after positive headlines regarding China’s Evergrande onshore bond coupon payments due tomorrow. Despite the Evergrande credit theme on the radar, liquidity conditions could improve slightly as Chinese players return from holidays.
Global cross-asset risk-on flows on the back of the previously painted headline pointing to China Evergrande to fulfil the bond coupon payments on onshore bonds due tomorrow. The recent price action reveals that global markets are sensitive to any updates on the Evergrande situation. The focus is now on the firm’s next round of Evergrande’s bond coupon payments. Few participants are hoping for China’s intervention if the crisis worsens. However, Chinese officials dismiss that an intervention is likely.
On the policy front, it is worth keeping a close on Japanese assets and US-related products as The Bank of Japan and the Federal Reserve will announce their updates on Monetary Policy later in the session. For the FOMC decision, Fed Fund Rates will be left unchanged. The focus will be on whether the Fed provides “advance notice” that it intends to taper its asset purchases at an upcoming meeting. The Fed policymakers will likely signal that discussion on the pace and composition of the bond tapering will be held at future meetings. Participants’ attention will then fall on how many hikes the Fed members are pencilling in over its projection horizon (currently, it sees two hikes in 2023, and some participants think it may add up to three hikes in 2024).
