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S&P closed higher by 0.2% while Nasdaq moved up 0.7% to continue making new highs. Tech once again traded higher, up 1% while Materials and Financials (down 1.3% and 1%) weighed down on the indices. Apple was up 2.5%, Facebook 1.7%, Amazon 1.1% and Alphabet and Microsoft were up 0.8% each. A Survey of Consumer Expectations for May by the Fed revealed that the inflation rate is expected to be 4% one year from now and 3.6% three years from now. All eyes are now set on the FOMC meeting tomorrow. US 10Y Treasury yields climbed 2bp from three month lows to 1.48%. European markets were largely flat with DAX down 0.1% and CAC and FTSE up 0.2%. Spreads widened across – US IG and HY CDS widened 0.33bp and 1.22bp respectively. US HY bond yields fell to a new record low of 3.84% as as tracked on the Bloomberg Barclays HY index. Bloomberg reports that the backdrop of an earnings recovery and strong returns of energy companies have helped demand for higher yielding assets.
EU main and crossover CDS also widened 0.32bp and 1.09bp respectively. In the Gulf, the Saudi TASI extended its gains by another 0.2% while UAE’s ADX again ended flat. In Latam, Brazil’s Bovespa was up 0.6%. Asian markets have opened mixed with China and HK down ~1% and others marginally higher. Asia ex-Japan CDS spreads were flat.
China Aoyuan Group capped $200mn 3NC2 bonds IPG 8.25% area
UOB S$ PerpNC7 AT1 IPG 2.85% area
A Regulation S or Reg S bond is one that is issued in the international bond market and is usually cleared through Euroclear and Clearstream. These bonds cannot be sold in the US, except to qualified institutional buyers (QIBs) under the SEC 144A Rule. The 144A Rule, issued in 1990, modified a two-year holding period rule on privately placed securities by permitting (Qualified Institutional Buyer) QIBs to trade in these securities among themselves. Thus, a 144A bond, with a unique identifier, is privately placed to US based QIBs and usually clears through DTCC.
Macquarie Group has launched a 6.25NC5.25 and 11NC10 Reg S bond issue.
John Taylor, money manager at AllianceBernstein Holding LP