US markets snapped a three week winning streak after the S&P and Nasdaq fell 0.8% each on Friday, ending the week 1% and 1.9% lower respectively after briefly touching records during the week. Upbeat earnings seemed to be overshadowed by weakness in consumer sentiment – the Michigan consumer sentiment index came in lower than expectations at 80.8 for the first half of July vs. 85.5 last month. Consumers expect prices to increase 4.8% in the next year, the highest since August 2008. Energy, down 2.8%, led the losses followed by Financials, Consumer Discretionary and IT, down 1.3%, 0.8% and 0.6% respectively. US 10Y Treasury yields dipped 4bp to 1.28%, trending against forecasts. European indices also ended another day in the red with a surge in Delta variant cases even as the inflation cooled to 1.9% in June from 2% in May – the DAX, CAC and FTSE were down 0.6%, 0.5% and 0.1% respectively. US IG CDS spreads widened 0.7bp and HY widened 3.5bp. EU Main spreads widened 0.2bp and Crossover spreads widened 1bp. Brazil’s Bovespa was down 1.2%. In the Gulf, OPEC+ clinched a deal to phase out oil production cuts by September 2022. Saudi TASI was up 0.2% while Abu Dhabi’s ADX was broadly flat. Asian markets followed the cue from the US markets. HSI, Nikkei, Singapore’s STI and Shanghai were down 2%, 1.5%, 1% and 0.7%. Asia ex-Japan CDS spreads were 0.7bp tighter.
Navigating The Bond Markets by Leveraging the BEV App | July 28
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New Bond Issues
Redco Properties capped $100.8mn tap of 11% 2022s final 10%
Road King Infrastructure $ 5NC3 green bonds at 5.5% area
Huijing 364-day $ notes final 12.5%, alongside exchange offer
Anton Oilfield $ 3.5NC2.5 at 9.25% area; alongside exchange offer
ICBC International Holdings $ 3Y bond at T+120a
Sunkwan Properties Group 364-day $ green bonds final 13%
Powerlong Real Estate raised $200mn via a 364-day note at a yield of 4.35%. The bonds were unrated. Proceeds will be used for general corporate purposes and offshore debt refinancing.
Huzhou Moganshan High-tech Group raised $210mn via a 3Y bond at a yield of 3.5%, unchanged from price guidance. Proceeds will be used to fund project development and working capital.
New Bonds Pipeline
Temasek subsidiary Vertex Venture hires DBS for S$ bond investor calls
Nonghyup Bank hires for $ social bond
CSSC (Hong Kong) Shipping hires for $ green bonds; calls today
Lai Sun Development hires for $ bond; calls starting today
- Kuwait Ratings Lowered To ‘A+’ By S&P On Lack Of Comprehensive Funding Strategy; Outlook Remains Negative
- BASF Outlook Revised To Stable From Neg By S&P On A Rebound In Operating Performance; ‘A/A-1’ Ratings Affirmed
- Wens Foodstuff Outlook Revised To Negative By S&P; ‘BBB-‘ Rating Affirmed; Rating Then Withdrawn At The Company’s Request
- Ithaca Energy ‘CCC+’ Rating Withdrawn By S&P At The Company’s Request
- Fitch Affirms MGM Resorts’ Ratings; Withdraws Instrument Ratings & MGM China IDR
- Outlook On Autovia de la Plata’s Debt Revised to Stable After Similar Action On BBVA; ‘A-‘ Rating Affirmed
Term of the Day
Capital Adequacy Ratio (CAR)
This is the ratio of a bank’s capital in relation to its risk-weighted assets. Capital here includes Tier 1 and Tier 2 capital. Risk weighted assets account for credit, market and operational risks with certain weights. Under Basel III, banks must have a minimum capital adequacy ratio (CAR) of 8% of risk weighted assets. CAR is used as a measure to ensure that banks have a cushion to absorb losses and is used while doing stress tests.
“The Fed has effectively removed some of the more extreme scenarios the market was worrying about.” “The more that rate hike expectations are baked in, the less inflation is expected to run out of control.”
“Bonds should be naturally allergic in their reaction to inflation,” Dowding said. “We suspect that we may look back at the current period in markets some time later in the year and view some of the trends we are witnessing as relatively strange.”