EM LATAM CREDIT: Braskem (BRASKM): Fitch downgrade

The scale of newly issued special bonds nationwide reached approximately CNY492 billion in November, 71% higher than October, Securities Daily reports. Ming Ming, chief economist at CITIC Securities, told the newspaper that the sharp expansion provided strong funding support for project construction across many regions. Song Xiangqing, vice president at the China Society of Commercial Economy, said the larger scale delivers immediate effects in stabilising investment and would help manage economic fluctuations. In addition to traditional infrastructure, issuance designated for “land reserve” purposes has reached roughly CNY503 billion in H2, the news outlet reported. Meanwhile, many regions have also begun directing special bond funds toward patient capital, allocating them to government investment funds.

Investors should avoid making one-way bets on the yuan’s exchange rate, warned Guan Tao, former senior official at the State Administration of Foreign Exchange. Although supportive factors currently dominate and the yuan may break below the 7.0 level, Guan argued the currency's ability to stabilise below that level remains uncertain. Should the year-end Central Economic Work Conference communiqué not emphasise exchange-rate stability, authorities may be signalling greater tolerance for volatility, which would open the door to wider fluctuations, he noted. Rather than assume a new appreciation cycle, Guan encouraged investors to adapt to the “new normal” of two-way volatility in the foreign-exchange market. 

US bond futures are all marginally lower Monday as markets play catch up from last week's disjointed trading.  The US-10Yr is down -02 to 113-09, above the 20-day EMA of 113-01+.  

• The 2-Yr is up +0.2bps at 3.496%
• The 5-Yr up +1.2bps at 3.61%
• The 10-Yr up +1.9bps at 4.036%
• The 30-Yr up +2.4bps at 4.689%

This week markets will look for any key messages from :

• Jerome H. Powell — Chair of the Fed — is slated to speak Monday at a panel discussion at Stanford.
• Michelle W. Bowman — Vice Chair for Supervision — is scheduled to give a speech this week (on bank supervision/regulation).