Advanced Theory & Practice of Bonds

IBF Recognized Under FTS
1-2 December 2021

Two-day immersive course on bonds designed for private bankers and advisors. 90% funding* available to eligible company-sponsored candidates.

After a respite on Monday, US equities closed in the red on Tuesday with the S&P down 0.8% and Nasdaq down 1.7%. US 10Y Treasury yields eased 3bp with the risk-off tone. While Wall Street moved lower, Europe’s FTSE, DAX and CAC 40 rose 0.4%, 0.2% and 0.3%. After CDS spreads saw a sharp contraction on Monday, the moves were muted yesterday. US IG CDS spreads were 0.7bp wider and HY was a 4.3bp wider. EU main CDS spreads tightened 0.1bp and crossover spreads widened 1.3bp. China’s Caixin Services PMI came at 51.5 for February, slightly lower than the January’s print of 52. Asian equity markets are up 0.5% and Asia ex-Japan CDS spreads are tighter by 0.1bp.

Bond Traders’ Masterclass | 25% Discount on a Bundle of Five Sessions

Keen to learn bond market fundamentals from industry professionals? Sign up for our Bond Traders’ Masterclass that consists of five modules starting on March 24.

withoutexpert-NL banner

The modules are specially curated for private bond investors and wealth managers to develop a strong fundamental and practical understanding of bonds. Given the ultra-low interest rate environment, flurry of new bond deals particularly from junk-rated issuers and tightening credit spreads, it is now more important than ever for investors to understand bond valuation, portfolio construction and new bond issues to help them get better return for risk. The sessions will be conducted by debt capital market bankers who have previously worked at premier global banks such as Credit Suisse, Citi and Standard Chartered.

New Bond Issues

  • HCL Tech $500mn 5Y at T+100bp area
  • Minsheng Financial Leasing $ 3Y senior loan-backed note at 3.6% area

New Bond Issues 3 Mar

 

China South City Holdings raised $175mn via a 1Y11M senior bond at a yield of 14.375%, 12.5bp initial price guidance of 14.5% area. The bonds have an expected rating of B and received orders over $900mn, 5.1x issue size. Proceeds from the Hong Kong-listed company which develops and runs logistics and trade centers will be used for debt refinancing and general corporate purposes.

Development Bank of Philippines raised $300mn via a 10Y bond at a yield of 2.421%, or T+100bp, 25bp inside initial guidance of T+125bp area. The bonds have expected ratings of BBB and received orders over $1.1bn, 3.7x issue size. Proceeds will be used to refinance a $300mn bond maturing in March, for lending activities and general corporate purposes. The bank is 100% owned by the government of Philippines.

Commonwealth Bank of Australia (CBA) raised $2.75bn via a dual-trancher. It raised $1.5bn via a 10Y bond at a yield of 2.688%, or T+130bp, 20/25bp inside initial guidance of T+150/155bp area. It also raised $1.25bn via a 20Y Tier 2 bond at a yield of 3.305%, or T+125bp, 20bp inside initial guidance of T+145bp area. The bonds have expected ratings of Baa1/BBB+/A-.

Korea Development Bank (KDB) raised $1.2bn via a three trancher. It raised:

  • $400mn via a 3Y bond at a yield of 0.458%, or T+20bp, 25bp inside initial guidance of T+45bp area
  • $300mn via a 3Y green floater at a yield of SOFR+25bp, as against initial guidance of SOFR equivalent
  • $500mn via a 5.5Y bond at a yield of 1.032%, or T+35bp, 25bp inside initial guidance of T+60bp area

The senior bonds have expected ratings of Aa2/AA/AA-, in line with the issuer. Proceeds from the green portion will be allocated toward financing and/or refinancing new or existing projects from the eligible green categories under the policy bank’s sustainable bond framework. Proceeds from the fixed rate notes will be used for general operations, including extending foreign currency loans and the repayment of maturing debt and other obligations.

AusNet raised €700mn ($843mn) via a 60Y non-call 5.5Y (60NC5.5) hybrid bond at a yield of 1.625%, 37.5bp inside initial guidance of 2% area. The bonds have expected rating Baa2/BBB and received orders of over €5.4bn, 7.7x issue size. The bonds have coupon step-ups of 25bp after 10.5 years and 100bp after 25.5 years if not called.

Orix Corp raised $500mn via a 10Y bond at a yield of 2.294%, or T+88bp, 22/27bp inside initial guidance of T+110/115bp area. The SEC registered bonds have expected ratings of A3/A-/A-.

New Bond Pipeline

  • Meinian Onehealth Healthcare $ bond
  • Microsoft $ bond alongside exchange offer
  • JSW Steel $ bond
  • Coca-Cola $/€ bonds
  • TransCanada Trust $ bond

 

Rating Changes

 

Term of the Day

Loan-Backed Bonds

These are bonds where proceeds from the issue are given as a loan to a company and the repayment of coupons and principal are backed by the payments on the loan. Minsheng Financial Leasing has issued 3Y senior-loan backed notes with the issuer being Landmark Funding 2020Moody’s writes that the notes are backed by the loan facility made by Landmark Funding 2020 to Minsheng Hong Kong International Leasing Ltd. that is unconditionally and irrevocably guaranteed by Minsheng Financial Leasing Co. Proceeds of the issuance will be given as a loan to Minsheng Hong Kong International Leasing Ltd. under a facility agreement. The principal and interest payable by Minsheng Hong Kong International Leasing Ltd. under the facility agreement will correspond to the principal and interest payable by Landmark Funding 2020 Limited under the notes.

 

Talking Heads

On US Democrats’ disapproval of lenders’ appeal to extend easing of capital requirements – Jerome Powell, Federal Reserve Chairman

“Banks have taken very large reserves against losses and so have proven themselves pretty resilient,” Powell said. “And the result, what you see now, is a banking system that has higher capital than it did going into the pandemic, and particularly for the largest banks.”

On the Federal Reserve acknowledging its alertness on tumult in the bond market

Lael Brainard, Federal Reserve governor

“I am paying close attention to market developments — some of those moves last week and the speed of those moves caught my eye,” Ms. Brainard said.  “I would be concerned if I saw disorderly conditions or persistent tightening in financial conditions that could slow progress toward our goal.”

Jerome Powell, Federal Reserve Chairman

“In a way, it’s a statement of confidence on the part of markets that we will have a robust and ultimately complete recovery,” Powell said.

Mary Daly, president of the Federal Reserve Bank of San Francisco

“We do have these other tools, and one of them is changing the composition of asset purchases,” she said.

On European shares pausing as investors take stock of bond market

Michael Hewson, chief market analyst at CMC Markets

“We are in the yield waiting room to see whether central bankers push back this week on the ambivalence we saw last week about interest rates,” said Hewson. “Potentially that was a mistake, giving the impression that the US did not really care about sharp rises in yields and sending the wrong message.”

Guo Shuqing, head of the China Banking and Insurance Regulatory Commission

“Financial markets are trading at high levels in Europe, the U.S. and other developed countries, which runs counter to the real economy,” Guo said.

On the risk of bubbles in foreign and property markets

Guo Shuqing, head of the China Banking and Insurance Regulatory Commission

“I’m worried the bubble problem in foreign financial markets will one day pop,” he said. “China’s market is now highly linked to foreign markets and foreign capital continues to flow in.” “The core problem in the real estate sector is still relatively large bubbles,” said Guo.Qu Hongbin, chief China economist at HSBC

Qu said that policymakers in China will “naturally pay more attention to the debt risks” now that the recovery was well on track, but added that “concerns about rising debt levels forcing Beijing to tighten fiscal and monetary policy are overblown”.

 

Top Gainers & Losers – 03-Mar-21*

BondEvalue Gainer Losers 3 Mar

Show Buttons
Hide Buttons