Want to Learn About Bonds? Join Us for The Upcoming Bond Masterclass
Be a part of the upcoming 8-module course designed & curated to help develop a comprehensive understanding of bonds along with practical and actionable insights on how to trade and advise on bonds better. The course will be conducted via Zoom over 8 modules on 27-30 September and 4-7 October (Monday-Thursday) at 5pm Singapore / 1pm Dubai / 10am London.
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New Bond Issues
- ICBC $ PerpNC5 AT1 at 3.65% area
- Ayala $ PerpNC5 at 4.3% area
- Bank Negara Indonesia $ PerpNC5.5 AT1 at 4.7% area
- Frasers Property AHL S$ 7Y sustainability at 3.25%
- Yincheng International $ 364-day at 13.75% final
- Pinghu State-owned Assets Holding $ 3Y at 2.65% area
- Beijing Environment Sanitation Engineering Group $ 230mn 3Y green at 2.05% area
JSW Steel raised $1bn via a two-tranche deal. It raised $500mn via a 5Y bond at a yield of 3.95%, 42.5bp inside initial guidance of 4.375% area. It also raised $500mn via a 10Y sustainability-linked bond at a yield of 5.05%, 45bp inside initial guidance of 5.5% area. Final combined orders exceeded $4.7bn, 4.7x issue size. US investors were allocated 19% of 2027s, EMEA 42% and Asia 39%. Fund/asset managers bought 80%, banks 13% and private banks 7%. For the SLB 2032s, US took 29%, EMEA 35% and Asia 36%. Fund/asset managers bought 93%, banks 2% and private banks 5%. The 10Y notes have a one-time 37.5bp coupon step-up if the issuer fails to meet its sustainability performance target, which is a 23% reduction of CO2 emissions intensity by 2030 from a 2020 baseline. Both bonds have expected ratings of Ba2/BB- (Moody’s/Fitch). The new 5Y bonds are priced 10bp wider to its existing 5.95% 2026s issued by subsidiary Periama Holdings LLC that currently yield 3.85%.
JPMorgan raised $3.25bn via a two-tranche deal. It raised $2.75bn via a 6NC5 bond at a yield of 1.47%, 18-23bp inside initial guidance of T+85-90bp, and $500mn via a 6NC5 FRN bond at a yield of 0.815% or SOFR+76.5bp vs initial guidance of SOFR equivalent. The bonds are rated A- (S&P).
Credit Agricole raised €3.25bn via an 8NC7 social bond at a yield of 0.526%, 22-27bp inside initial guidance of MS+90-95bp. The bonds have expected ratings of A3/A-/A+. The notes have a fixed coupon of 0.5% until the call date of 21 September 2028. If not called, the coupon resets quarterly at 3mE + 68bp.
Bank of America raised €2bn via a 5NC4 floating rate bond at a yield of -0.04%, 25bp inside initial guidance of 3mE+75bp area. The bonds are rated A- (S&P). The bonds have a first call date on 22 September 2025. The quarterly coupon rate follows the prevailing 3mE + 100bp.
Chile raised €918mn via a 7Y social bond at a yield of 0.555%, 30bp inside initial guidance of MS+100bp area. The bonds have expected ratings of A1/A/A-. The Chilean government will invest an amount equal to the proceeds from the sale of the notes, net of underwriting discount and expenses, into projects that may qualify as “eligible social expenditures” under Chile’s Sustainable Bond Framework.
Julius Baer Group raised $320mn via a Perp NC7 AT1 bond at a yield of 3.625%, 62.5bp inside the initial guidance of 4.25% area. The bonds have expected ratings of Baa3 (Moody’s), and received orders over $4.3bn, 13.4x issue size. The AT1s have a first call date on 23 March 2028, and if not called, the coupon will reset on 23 September 2028 to US 5Y Treasury + 253.9bp. The notes will have a permanent writedown if core equity Tier 1 capital drops to 5.125% or lower.
Westpac raised €1.75bn via a two-tranche euro deal. It raised €1.25bn via a 7Y bond at a yield of -0.067%, 4bp inside the initial guidance of MS+13bp area, and received orders over €2bn, 1.6x issue size. It also raised €500mn via a 15Y bond at a yield of 0.44%, 3bp inside the initial guidance of MS+19bp area, and received orders over €545mn, 1.1x issue size. The bonds have expected ratings of Aaa/AAA (Moody’s/Fitch).
Bangkok Bank raised $1bn via a 15NC10 tier 2 bond at a yield of 3.466%, 35bp inside the initial guidance of T+250bp. The bonds have expected ratings of Baa3 (Moody’s), and received orders over $3.4bn, 3.4x issue size. The bonds have a one-time call on 23 September 2031, and if not called, will reset to US 5Y Treasury + 215bp. The bonds will have a permanent write-down if the issuer requires a capital injection from the Bank of Thailand and/or any other empowered government agency, without which the issuer would become unable to continue its business in any manner.
Korea Electric Power raised $300mn via a 5Y green bond at a yield of 1.202%, 35bp inside the initial guidance of T+75bp area. The bonds have expected ratings of Aa2/AA (Moody’s/S&P), and received orders over $2.1bn, 7x issue size. Proceeds will be allocated to eligible green categories under the company’s sustainable finance framework. The new bonds are priced 13.2bp wider to its existing 0.01125% green 2025s that yield 1.07%. Asia took 96% and EMEA 4%. Banks bought 42%, central banks, SSAs and sovereign wealth funds 31% and asset managers and fund managers 27%.
Jinan City Construction Group raised $305mn via a 5Y bond at a yield of 2.4%, 60bp inside initial guidance of 3%. The bonds have expected ratings of Baa2/BBB+ (Moody’s/Fitch), and received orders over $2.2bn, 7.2x issue size. Proceeds will be used for the repayment of the offshore bonds due within one year issued by subsidiary Jinan West City Investment Development Group. The bonds will be issued by partially owned subsidiary Jinan Urban Construction International Investment and guaranteed by Jinan City Construction Group. APAC bought 99% while EMEA took 1%. Banks and financial institutions received 74%, asset managers, fund managers and hedge funds 19%, insurers 6% and private banks 1%.
New Bonds Pipeline
- Oxley Holdings hires for S$ tap of 6.9% 2024s bond
- Maldives’ HDC hires for $ 3Y sustainability bond
- Clover Aviation Capital hires for $ bond
- Weifang Urban Construction and Development hires for $ bond
- Zensun hires for $ bond
- Apicorp hires for $ 5Y green bond
- Chengdu Aerotropolis City Development hires for $ bond
Rating Changes
- Moody’s upgrades Geo Energy to B3; outlook stable
- Central China Real Estate Outlook Revised To Negative On Tough Operating Conditions; Ratings Affirmed At ‘B+’
- Evergrande And Subsidiaries Downgraded To ‘CC’ On Depleted Liquidity; Outlook Negative
- Moody’s upgrades Singapore Power to Aa1 and upgrades its BCA to a2; outlook stable
- Moody’s upgrades EVRAZ plc’ senior unsecured rating to Ba1, withdraws CFR; stable outlook
- Fitch Revises Outlook on Sinic to Negative; Affirms at ‘B+’
- Moody’s downgrades PBF and PBFX to B2
- Brazilian Steelmaker Usiminas Upgraded To ‘BB’ And ‘brAAA’ On Record High Results And Sharp Deleveraging; Outlook Stable
- Fitch Revises Kernel’s Outlook to Positive; Affirms Ratings
Term of the Day
Flat Bond Trading
Flat trading in bond parlance refers to the trading of the bond without accrued interest. Bonds have a clean price in the market and a dirty price (the clean price plus accrued interest) which a buyer must pay to the seller for settlement of the bond. When a bond is trading ‘flat’, since there is no accrued mentioned on the price ticket, the bond seller and buyer don’t get into a dispute over that if the bond issuer doesn’t pay. Bonds can trade ‘flat’ due to a few reasons – when the settlement date is the same as coupon date or; no interest is due or; when an issuer is in default or doubt.
Evergrande’s bonds were said to be trading ‘flat’ in the secondary market as per sources.
Talking Heads
On Bonds rallying and bank stocks falling on signs US inflation levelling off
Zehrid Osmani, manager of Martin Currie’s global portfolio trust
“We’re definitely seeing a trend of inflation becoming less severe. Inflationary pressures are going to die down from the back end of this year.”
Analysts at TD Securities
“The moderation in inflation creates less urgency for the Fed to tighten policy.”
Kasper Elmgreen, head of equities at Amundi
“I’m leaning towards inflation becoming more permanent… We are then getting into a stagflationary environment.”
Bank of America strategists
“Growth expectations are saying equity allocations should fall”
On Evergrande’s Bond Crisis – Matthews Asia’s head of fixed income, Teresa Kong
“The first sin is that the cash-strapped property giant has borrowed too much money. The second is that the firm has “questionable corporate governance. So when you have the two together, it’s like having a really dry forest and the tinder to really ignite”
On China to Monitor Impact of Property Developers in Difficulties
Some large-sized property companies encountered some difficulties, and the impact on real estate industry needs to be monitored. Property control measures have curbed unreasonable demand and helped release normal demand.
On China Widening access to offshore bonds for domestic investors – HKMA Chief
China’s upcoming Southbound Bond Connect scheme will include all tradable bonds in Hong Kong regardless of their currency
On ECB’s Bond Buying Volumes – ECB Economist Philip Lane
“It’s not a good idea to identify the monetary policy stance with the volume of asset purchases. The efficient approach is to emphasize persistence. We’re happy that our monetary accommodation is strengthening the underlying inflation dynamic and over time — this will continue to build. We have a coherent policy setting.”
On China’s slowing growth data
Chang Shu, chief Asia economist at Bloomberg
“The data significantly strengthen the case for the central bank and government to step up policy support — quickly. A growing divergence between the supply and demand sides of the economy is increasingly clear. We think they could diverge further.”
China’s NBS
“The international environment is complex and grim, and the impact from domestic virus outbreaks and natural disasters such as floods on the economy is showing. The economic recovery still needs to be solidified”
Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong
“The recovery could see further slowdown amid fresh Covid outbreaks…A cross-cyclical combination of targeted tightening and easing is needed”
Top Gainers & Losers – 16-Sep-21*
