A shocking news goes to the latest interest rate hike in the Federal Reserve that hits the long-lived market in Asia. As a result, the Fed’s rate sentiment swings from positive to negative very quickly resulting in a short-lived market rally. Despite this situation, sentiment also quickly rebounds especially in the offshore bond issuance. Apparently, the Fed’s 75bp increase fund target rate is the biggest in three decades. Although it is not a big surprise, the market prepares for the significant move after the rising consumer price index for 8.6%.
After the announcement of the swing, Asian trading left a positive note. Bankers also argued that the Fed’s decision has given the market what it wants. Thus, both issuers and investors would see it as a positive swing or long-lived market. A China-focused senior banker argued that people expected 50bp but the CPI shifted overnight. Hence, people have prepared for the 75bp increase shock. This is following the bankers’ optimism as the newfound clarity would attract more activities.
The market might have a clear window in which the investment-grade names would inflict printed deals. However, all of sudden the relief inflicts another confusion and fear due to the opening of European and the U.S. markers. A DCM head noted that when people received the news, they realized that there would be more pains than gains. Hang Seng stock index in Hong Kong jumped at 2.2%. The S&P 500, Nasdaq 100 as well as Dow Jones Industrial Average also fell from 2.2% to 2.4%.
Based on the syndicate head, the Asian secondary bond has moved in line with the stock markets. Both investment-grade and high-yield bonds tightened in a few basis points. Prices tumbled at once. In addition, by the day iTraxx Asia investment-grade CDS index widened from 11bp to 139bp, said IFR. The syndicate head argued that people have lost confidence especially in the ability of the Fed controlling inflation.