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Macau’s casino operators’ dollar bonds are set to benefit from an influx of tourists from China and thus are being preferred over Las Vegas counterparts, said PIMCO’s global credit CIO Mark Kessel. After being “pretty bullish” on Vegas bonds, he said that PIMCO is reducing its exposure there and now turning towards Macau. He added, “Macau is not fully recovered whereas Vegas has. There are really some gems out there… the airlines, the lodging, the gaming, the cruise lines. We love all those sectors”. Tourist arrivals over the recently concluded Golden Week holiday stood at about a million, of which 76% were from mainland China. With the broad bullish view on Macau, JPMorgan estimates that gaming income from mass-market tourists reach 110% of 2019 levels next year. Bloomberg data suggests that Macau casino bonds have delivered YTD returns of 3.9%, a significant outperformance over Chinese high yield bonds that are down 16%.
Below is a plot of casino dollar bonds of Macau as compared to its Vegas counterparts. Hover over the interactive chart for more details including the price, yield, issuer rating and z-spread. In the chart below, it can be observed that Macau dollar bond offer a higher yield than Vegas counterparts in the front-end of the curve. However, for the longer-dated bonds, Vegas bonds offer a higher yield.