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US Treasury yields eased slightly across the curve. US business activity expanded in April at the slowest pace yet this year, as the S&P Composite PMI fell 1.2 points to 50.9. Manufacturing entered contraction territory, with the Flash Manufacturing PMI slipping to 49.9 this month from 51.9 in March. The survey’s Flash Services Sector PMI dipped to 50.9 in April from 51.7 in the prior month. Separately, the Treasury’s 2Y auction saw solid demand at a yield of 4.898%, stopping through the when-issued yield of 4.904%. The bid-to-cover was at 2.66x, higher than the 2.62x seen in its prior auction last month. US IG CDS spreads tightened 1.8bp and HY spreads were 10bp tighter. S&P rose 1.2%, Nasdaq rose 1.6% respectively.
European equity indices ended higher. European IG CDS spreads tightened 2.9bp while crossover spreads were 12bp tighter. Asian equity markets have opened in the green today. Asia ex-Japan IG CDS spreads were 0.4bp tighter.
CK Hutchison raised $2bn via a two-tranche deal. It raised $1bn via a 5Y green bond at a yield of 5.42%, 35bp inside initial guidance of T+115bp area. It also raised $1bn via a 10Y bond at a yield of 5.586%, 35bp inside initial guidance of T+135bp area. The notes are rated A2/A/A-. Proceeds from the 10Y note will be used to refinance certain debts and for general corporate purposes. Proceeds from the 5Y green notes will be used for assets, projects, investments and other related and supporting expenditure in accordance with its sustainable finance framework. The issuer is CK Hutchison International (24) Limited and CK Hutchison Holdings Limited is the guarantor. The new 5Y bonds were priced at a new issue premium of 5bp over its existing 3.625% 2029s that currently yield 5.37%.
Abu Dhabi raised $5bn via a three-trancher. It raised:
The senior unsecured notes are rated AA/AA (S&P/Fitch).
Citibank NA raised $5bn via a three-part deal. It raised:
The senior notes are rated Aa3/A+/A+. Proceeds will be used for general corporate purposes.
Auction tails and stop throughs are metrics that can help in understanding whether the auction was well bid or not and is to be seen with the bid-cover ratios and other metrics. These are particularly observed in Treasury securities auctions. An auction tail occurs when the final yield of the bond auctioned is higher than the when-issued yield (WI yield) and can indicate that demand was not strong enough even though bid-cover might have been strong. On the other hand, a stop through occurs when the final yield is lower than the when-issued yield (WI yield) and can indicate that demand was particularly strong for that bond.
On Scope for Two Fed Rate Cuts This Year – BlackRock’s Rick Rieder
“It’s getting harder for them to do that, but I still think they can… Once you get visibility on a couple of good inflation reports … then you can start to extend duration”
On Bracing for ‘third wave’ of China bond defaults – S&P
Charles Chang, country lead S&P’s Greater China
“Policies aimed at reining in excessive leverage have driven two default waves so far. More policies with similar aims, scale and effects may lead to the next wave of defaults”
Shen Meng, director at Beijing-based investment firm Chanson & Co
“Tightening of financing will further compress the flexibility of a company’s operations and shake the foundation of its financial stability.”
On says US economy is booming – JPMorgan CEO, Jamie Dimon
US economic boom is “unbelievable”… “Even if we go into recession, the consumer’s still in good shape.”