SOVEREIGN DEBT RESTRUCTURING | MASTERCLASS

A deep dive masterclass on sovereign debt restructuring, to be conducted virtually by Asian high yield bond expert Florian Schmidt.

30 June 2022 (Thu), 5pm Singapore/HK time

S&P ended the day flat while Nasdaq was up 0.6% with Apple up 3.7% and Facebook up 2%. US 10Y Treasury yields were 2bp wider. US jobless claims for the prior week improved, printing at 900k, a fall of 26k. US Philly Fed Manufacturing exceeded expectations with a 17.4 point jump to 26.5. Also, US House speaker Pelosi said they will be ‘completely ready’ to pass Biden’s $1.9tn coronavirus relief bill by February 1. The ECB kept its policy rates and stimulus unchanged. FTSE, DAX and CAC fell 0.4%, 0.1% and 0.7%.  US IG CDS spreads were flat and HY was 1.7bp wider. EU main and crossover CDS spreads widened 0.3bp and 2.9bp respectively. Asia ex-Japan CDS spreads tightened 1.4bp and Asian equities are off to another positive start, up ~0.7% today.

All-Mod-Newsletters

 

New Bond Issues

  • AVIC International capped $200mn 5Y at T+295bp area

New Bond Issues 22 Jan

Development Bank of Japan (DBJ) raised $1bn via a 10Y bond at a yield of 1.328%, 4bp inside initial guidance of Mid-Swaps + 26bp area. The bonds have expected ratings of A1/A+ and received orders over $4.7bn, 4.7x issue size.

Mongolian Mortgage pulled its proposed dollar 3Y bond after the country’s Prime Minister and most of his cabinet resigned following protests. The deal was pulled after the company released final guidance, which was unchanged from initial guidance of 9.125%.

New Bond Pipeline

  • GMR Hyderabad $ Yankee bond
  • Hong Kong government $ 144a/Reg S green bond
  • Buma $ 5NC2 bond
  • Laos $ bond
  • Dubai Aerospace Enterprise $ bond
  • Woori Bank $ bond
  • Zurich Insurance $ 30.25NC10.25
  • REC $ bond

 

Rating Changes

 

2020 Bond Market Round Up – Sukuk

In case you missed it, we summarized the bond market in terms of best/worst performing bonds, largest deals and issuance volume for global and Asian dollar bonds in 2020. You can read the full report via the button below:

Read the 2020 Bond Market Report

 

Term of the Day

Panda Bonds

Panda bonds are renminbi denominated notes sold by a non-Chinese issuer in onshore China. The first of its kind was issued by the IFC and ADB in 2005. While these bonds attract Chinese investors, they have also gained traction from international investors. It also helps issuers diversify investor bases and reduce currency risk. ADB today has hired banks for a Panda bond issuance.

 

Talking Heads 

On the euro-zone economy headed for a double-dip recession – Christine Lagarde, European Central Bank President

“Risks surrounding the euro-area growth outlook remain tilted to the downside, but less pronounced,” she said. “The roll-out of vaccines, which started in late December, allows for greater confidence in the resolution of the health crisis.” “We believe fiscal support has to be continued,” she said. “The slight qualification we would have is that we certainly recommend it is as targeted as possible and temporary, given that we all

hope for recovery during the course of 2021, probably in the second half more than the first half.”

On benchmark indices hitting records over prospect of further stimulus and easing of trade tensions

John Roe, head of multi-asset funds at Legal & General Investment Management

“Markets are celebrating the idea of out with the old,” said Roe. “The concept of a United States that isolates itself and does not care about issues that matter globally is being reversed very rapidly and that is good for international co-operation, international law and international trade.”

Remi Olu-Pitan, a multi-asset fund manager at Schroders

“When investors are concerned about global growth, they go to the safety of the US government bond market and the dollar,” said Olu-Pitan. “When people are feeling more optimistic about the world they buy the [Brazilian] real or the [South African] rand.”

Charlotte Harrington, multi-asset fund manager at Fidelity

“At some point we move into a world where vaccines take hold, Covid is less of a near-term issue and the Fed will be increasingly talking about tapering its purchases,” Harrington said. “The way this is communicated will be the biggest risk to the emerging market call.”

On bond investors piling into long-dated debt

Richard Kelly, head of global strategy at Toronto-Dominion Bank

“We have too much cash chasing too few assets,” said Kelly. “So the strong demand for duration is just part of that overall chase.

Piet Christiansen, chief analyst at Danske Bank A/S

“Anything that has the slightest yield is great news,” said Christiansen. “The fact that investors are seeking longer duration in a hunt for yield just shows that markets can’t get enough.”

On environmental goals spurring demand for new type of bonds in Asia – Mushtaq Kapasi, ICMA’s chief representative for the Asia-Pacific region

“The interest is of course coming from issuers in ‘transition’ industries, particularly energy and agriculture, but also encouragingly from regulators and policy makers who see this as a way to increase sustainable finance in support of environmental policies directed towards the Paris goals,” said Kapasi.

On the significance of rising bond yields

Erin Browne, portfolio manager at PIMCO

“While the dollar is still expensive on an absolute basis relative to other currencies, the steepening in the U.S. yield curve… makes the dollar start to look a little bit more attractive,” said Browne.

Greg McBride, chief financial analyst at Bankrate.com

There has been “on average about a 10 basis point increase on the most competitive rates,” said McBride. “The jump in the 10-year has increased the yields that investors are requiring to purchase mortgage-backed securities.”

 

Top Gainers & Losers – 22-Jan-21*

BondEvalue Gainer Losers 22 Jan

Ratings are in the order of Moody’s/S&P/Fitch

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