The problem is not Evergrande, it’s China

Listening to the slow grind of cognitive gears about China is painful. Goldman:

Macro volatility has had limited impact, so far, on performance across the Asia credit market. The recent move higher in US Treasury yields and downside pressures on China growth have not provided a negative drag on Asia credit spreads, which have mostly remained stable. Could macro factors become a more important factor going forward? We believe issues surrounding the property sector remain the key source of volatility in the near term. So whilst we maintain our preference for Asia HY over IG, we believe investors should position in the lower beta segments, and avoid the riskier credits in both IG and HY.

We do not believe the recent move up in US Treasury yields will be a negative near-term factor for Asia credit. First, our Global Rates team anticipate that yields will continue to trade with a flattening bias on hawkish monetary policy news. Second, according to our Global Credit Strategy team, the empirical evidence suggests that rising nominal rates become a headwind to corporate bond excess returns only if they feature increasing real yields and declining breakeven inflation. They think the risk is still low. According to our Asia Economics Team, there has not been decisive macro policy response in light of slowing growth China because, in their view, policymakers see some of the current stresses as temporary, and remain keen to avoid over-stimulus. The week-long National Day holidays underway may be a catalyst for news on policy steps related to containing spillovers from Evergrande and/or to support the broader economy.