China is gearing up to intervene in its sovereign bond market for the first time in decades as yields on its debt are at record lows, the Financial Times reports. Following weeks of expressing its concern about record-low yields, the People’s Bank of China is now moving to build up firepower to sell CPY hundreds of bns of sovereign bonds as it looks to cool off demand for the paper. The country’s central bank will “continue to borrow and sell the bonds on an open-ended and unsecured basis,” according to the salmon-colored paper.

Demand for the sovereign bonds has been red-hot: Investors have been pouring into China’s sovereign bonds as the country’s economy stumbles due to an ongoing real estate market crisis and volatility in its equities. That’s pushed yields on 10-year bonds below 2.4% for the majority of the year, while the country’s central bank has said that the “ideal range” for yields on these notes is between 2.5-3%.

It’s going to take more than a limited intervention: Although the signaling from the People’s Bank of China has helped to some degree, pundits say the issue is more structural and is unlikely to be resolved entirely through a bond market intervention “unless the intervention is massive.” One Natixis senior economist tells the FT that the People’s Bank of China will likely need to buy up “at least 5% of outstanding government bonds … to make a significant difference.” Altogether, that would be around CPY 1.5 tn worth of bonds.

MARKETS THIS MORNING-

Asian markets are having another mixed morning, with Hong Kong’s Hang Seng index and Japan’s Nikkei both up, as China reports better-than-expected inflation data and Japan’s corporate goods price index rises in line with expectations. South Korea’s Kospi and the ASX 200 are both in the red.

Wall Street futures were little changed in overnight trading after the S&P 500 posted another record close, as traders celebrated Powell’s signals for a potential rate cut soon.

TASI

11,779

+0.5% (YTD: -1.6%)

MSCI Tadawul 30

1,472

+0.6% (YTD: -5.1%)

NomuC

25,561

-1.7% (YTD: +4.2%)

USD : SAR (SAMA)

USD 3.75 Sell

USD 3.75 Buy

Interest rates

6.5% repo

5.5% reverse repo

EGX30

28,466

+0.2% (YTD: +14.4%)

ADX

9,136

+0.03% (YTD: -4.6%)

DFM

4,078

-0.1% (YTD: +0.46%)

S&P 500

5,577

+0.1% (YTD: +16.9%)

FTSE 100

8,140

-0.7% (YTD: +5.3%)

Euro Stoxx 50

4.904

-1.3% (YTD: +8.5%)

Brent crude

USD 84.85

+0.2%

Natural gas (Nymex)

USD 2.35

+0.1%

Gold

USD 2,367.90

+0.2%

BTC

USD 57,860.60

+2.9% (YTD: +37.0%)

THE CLOSING BELL: TADAWUL-

The TASI rose 0.5% yesterday on turnover of SAR 5.2 bn. The index is down -1.6% YTD.

In the green: Al Kathiri (+7.5%), Sasco (+6.1%) and Miahona (+5.4%).

In the red: Al Baha (-7.7%), SSP (-2.7%) and Extra (-2.6%).

THE CLOSING BELL: NOMU-

The NomuC fell 1.7% yesterday on turnover of SAR 34.9 mn. The index is up 4.2% YTD.

In the green: Neft Alsharq (+10.3%), Leaf (+9.1%) and Apico (+5.3%).

In the red: Gas (-7.7%), Ladun (-7.2%) and Sure (-5.6%)

CORPORATE ACTIONS-

Shareholders of Tadawul-listed Ayyan Investment approved the board’s recommendation to increase its capital by 24.8% to SAR 1 bn by way of a rights issue, according to a disclosure to Tadawul. The capital increase comes under a plan to procure medical devices and equipment for a hospital affiliated with its subsidiary Al Salam Medical Services and pay obligations owed by the subsidiary among others, it added.

Alinma Investment will distribute SAR 5 mn in dividends to all unitholders of its Alinma Saudi Government Sukuk ETF Fund - Short Maturity for 1H 2024, it said in a disclosure to Tadawul. Shares will be distributed within 10 business days after the distribution entitlement date, it added.

Sedco Capital will distribute SAR 23.4 mn in dividends to all unitholders of its Sedco Capital Reit Fund for 2Q 2024, it said in a disclosure to Tadawul. The distribution date was set for Thursday, 22 August.

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