S&P and Nasdaq continued to climb higher, up 1.4% and 1.6% respectively. All sectors were in the green with financials and industrials rallying the most, up over 2% higher while the FAANGs continued to trade higher. According to CNN, US Senate Democrats have reportedly said that President Biden did not discuss lowering the $1.9tn size on the Covid relief package during a virtual meeting. US 10Y Treasury yields firmed 2bp. FTSE was up 0.8%, though it underperformed European indices with reports of the new Covid variant reducing vaccine efficacy while DAX and CAC were 1.6% and 1.9% higher. US IG CDS spreads were 2.2bp tighter and HY was 10.6bp tighter. EU main CDS spreads tightened 1.5bp and crossover spreads tightened 9.6bp. Asia ex-Japan CDS spreads are 1.2bp tighter while Asian equities are ~0.2% higher today.


New Bond Issues

  • Pertamina $ Yankee 5Y/10Y at 1.8%/2.7% area
  • IRFC $ 10Y at T+205bp area
  • AVIC Capital capped $300m 5Y at T+235bp area
  • Southwest Securities International $ 3Y at 4.6% area
  • Kexim $ 3Y/5Y/10Y at T+50bp/T+60bp/T+70bp areas; books over $4.3bn
  • Surbana Jurong S$ 10Y sustainability-linked bond at 2.75% area
  • CABEI $ 5Y social bond at MS+70bp area
  • Xinyuan Real Estate tap $ 14% 2024s at par

New Bond Issues 3 Feb

UBS raised $4bn via a three-part deal just a day after it raised $1.5bn via AT1s at 4.375%. It raised:

  • $2bn via a 11Y non-call 10Y (11NC10) TLAC bond at a yield of 2.095%, 25-30bp inside initial guidance of T+125/130bp area. The bond is rated A-/A+
  • $1bn via a 3Y bond at a yield of 0.476%, 20bp inside initial guidance of T+50bp area
  • $1bn via a 3Y floating rate note (FRN) at a yield of SOFR+36bp against guidance of SOFR + equivalent. The bonds are rated Aa3/A+/AA-

Mexico´s state-owned electric company Comisión Federal de Electricidad (CFE) raised $2bn via a dual tranche offering. It raised $1.2bn via a 10Y bond issued at par to yield 3.348% or T+225bp, 45bp inside initial guidance of T+270bp area. It also raised $800mn via a 30Y bond issued at par to yield 4.667% or T+280bp, 40bp inside initial guidance of T+320 area. BBVA, Goldman Sachs, JPMorgan, Mizuho, Barclays, Citi and Santander were lead managers of the deal. The new notes are expected to be rated BBB/BBB- at par with the issuer. Proceeds will be used to refinance debt and cover general corporate purposes. The issuance was well-timed, just a day after a new fast-track bill was introduced in Congress that favors CFE over private players.

LMIRT raised $200mn via a 5NC3 bond at a yield of 7.75%, 37.5bp inside initial guidance of 8.125% area. The bonds have expected ratings of B1/BB-, and received orders of over $1.1bn, 5.5x issue size. Asia took 89% and Europe 11%. Fund managers and pension funds booked 97%, and private banks and corporates 3%. Proceeds will be used to help refinance LMIRT’s S$175m ($132m) loan facilities due in August 2021, for working capital and for issuance expenses. LMIRT Capital will issue the bonds with a guarantee from Perpetual (Asia) Limited as trustee of LMIRT.

China Overseas Grand Oceans raised $512mn via a 5Y bond at a yield of 2.468%, or T+202.5bp, 47.5bp inside initial guidance of T+250bp area. The bonds have expected ratings of Baa2/BBB, and received orders over $4.6bn, ~9x issue size. Asia took 95% of the bonds and EMEA 5%. Fund managers bought 47%, banks and financial institutions 45%, insurers 2%, sovereigns 1%, and private banks and others 5%. Proceeds will be used to repay and/or refinance debt, and for general corporate purposes. The bonds will be issued by wholly owned subsidiary China Overseas Grand Oceans Finance IV (Cayman) and guaranteed by the parent.

Continuum Energy raised $560mn via a green bond at a yield of 4.5%, 37.5bp inside initial guidance of 4.875% area. The bonds have expected ratings of BB+, and received orders of over $3.2bn, 5.7x issue size at the time of final guidance.

China Industrial Securities International raised $300mn via a 3Y at a yield of 2%, 50bp inside initial guidance of 2.5% area. Proceeds will be used to repay short-term revolving bank loans. Parent company China Industrial Securities will provide a guarantee to the bonds.

JY Grandmark raised $137.5mn via a 364-day at a yield of 7.5%, 25bp inside initial guidance of 7.75% area. The bonds were unrated. Proceeds will be used to acquire or develop property projects, refinance debt and for general corporate purposes. The new bonds were issued alongside an exchange offer for its $150mn 7.5% 2021s due in March where holders will receive new 364-day notes on a par-to-par basis with a minimum yield of 7.5%, plus accrued interest for each $1,000 in principal.


New Bond Pipeline

  • Liberty Mutual Group
  • Jinchuan Group $ bond
  • Buma $ 5NC2 bond


Rating Changes


Term of the Day


An RFP is a document soliciting a proposal with the help of advisories that help with fundraising. RFPs are issued for different purposes and can range from bond issuances to other project related proposals typically done through a bidding process. The process begins with drafting the proposal, then a review by bidders, implementation of feedback post which the final request for proposal is sent. With regard to bonds, some of the tasks performed by the advisory entail assisting the issuer in structuring the bond issuance, determining the best type of financing vehicle, planning the bond sale etc.

Indian state-owned infrastructure finance company REC has sent a request for proposals to banks to issue a US dollar bond in Reg S/144A format, according to a source.


Talking Heads 

On no signs of market instability as Fed’s bond-buying program creates liquidity in financial markets – Robert Kaplan, Dallas Federal Reserve Bank President

“I don’t see anything right now systemic,” Kaplan said. “Some of the current situation you are seeing – one of the factors – is there is a lot of liquidity, and some of that relates to Fed purchases of $80 billion of Treasuries and $40 billion of mortgage-backed securities every month: I think it’s wise for us to acknowledge that.” “I still think we need to be doing what we are doing right now, in the teeth of the pandemic, but again, I think if we go beyond it, it will be healthier to start limiting this liquidity and normalizing policy down the road,” Kaplan said.

On the riskiest bank capital cheaper in Gulf than for UBS or HSBC

Redmond Ramsdale, head of Middle East bank ratings at Fitch
“We expect demand from investors for regional AT1 securities to remain strong.”

Mohammad Ahsan, managing director of rates and fixed income at Mashreq Bank

“Investors in the AT1 sukuk have opted for an inefficient risk-return payoff — a lower yield at the same risk,” he said.

Chirag Doshi, the chief investment officer at Qatar Insurance Co

“The issue size was overstretched for a debut AT1 deal, not only for NCB, but for the first such a sale in public market from Saudi Arabia,” according to Doshi.

On central banks taking rare step of flagging currency sales in advance

Alan Ruskin, chief international strategist at Deutsche Bank

“We are in an interesting moment when it comes to central banks straddling the fine line between [foreign exchange] intervention and [foreign exchange] manipulation,” said Ruskin. “While each of the [central banks] has different motivations, they do appear to be deftly dancing around possible censure from the US. This is a slippery slope,” he added. “The question you have to ask yourself is: would central banks be acting this way if the exchange rate was going the other way? I think not,” Mr Ruskin said. “What we are seeing is only the opening gambit of central banks responding to a weaker dollar environment,” Mr Ruskin said.

Heidi Elmer, head of the Swedish central bank (Riksbank) market department
“This is not currency intervention and we have been clear that this is not intended to have a monetary policy impact,” Elmer said. “Our objective is to ensure that we have appropriately financed currency reserves.”

Ed Al-Hussainy, a senior currencies and rates analyst at Columbia Threadneedle
“I see an environment in which currency intervention is becoming a more important tool for macro management,” said Al-Hussainy. “That may be a polite way of saying that currency wars are more likely,” he added.

On Reddit traders responsible for inflating bond bubble –  Cathie Wood, Ark Invest CEO

Wood says Reddit traders are “aiding and abetting the bond bubble.” “I believe bonds are in a bubble,” she said. “I believe what just happened with GameStop and AMC (AMC) and American Airlines (AAL) and Bed Bath & Beyond (BBBY) — all of those — is exacerbating the bond bubble. Because you’re bailing those bondholders out, so they can put money elsewhere.”

On Ant’s crackdown heightening power of China’s top banking regulator

According to a central bank adviser

“President Xi wanted the industry to be regulated. Guo [chairman of the China Banking and Insurance Regulatory Commission] helped put the leader’s thoughts into practice.” “Xi, Liu and Guo share a belief that the weaknesses of market economy can be addressed through strong regulation,” the adviser said.

Chen Long at Plenum, a Beijing-based consultancy

“Liu He is so powerful,” said Chen. “I don’t think any single person will inherit all of his portfolios.”

Andrew Collier, managing director at Orient Capital Research

“It is part of CSRC’s mandate to expand China’s influence in the global capital markets,” said Collier. “That’s a very different mandate from CBIRC or PBoC.”


Top Gainers & Losers – 3-Feb-21*

BondEvalue Gainer Losers 3 Feb


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