US Markets retreated from their early gains even after strong Q2 earnings from banking majors JPMorgan and Goldman Sachs (details below). S&P and Nasdaq were down ~0.4% with the fall spearheaded by Boeing’s 4.2% drop after the FAA reported a manufacturing quality issue on its 787 fleet (details below). Real Estate, down 1.3% and Consumer Discretionary down 1.2% led the drop while IT up 0.4% provided some support. Financials, Industrials and Energy were also down ~1%. US CPI rose to 0.9% MoM in June against a forecast of 0.5% – the largest one month change since June 2008. The inflation reading YoY came in at 5.4%, the highest in 13 years, vs. an estimate of 5.0%. The Core CPI, the index for all items less food and energy, rose 4.5% over the last year, the highest since 1991. US 10Y Treasury yields ended 3bp higher to 1.4% after the CPI release and a weak 30Y bond auction. European indices were broadly flat – DAX, CAC and FTSE down 0.01%. US IG and HY CDS spreads widened 0.7bp and 3.8bp respectively. EU main CDS spreads were flat while crossover spreads tightened 0.5bp. Brazil’s Bovespa was up 0.5%. Saudi TASI and Abu Dhabi’s ADX were up 0.4% and 0.3% respectively. Asian markets opened in the red – HSI and Shanghai were down 0.4%, Nikkei was down 0.2% and Singapore’s STI was down 0.1%. Asia ex-Japan CDS spreads were 0.1bp tighter.
New Bond Issues
- KT Corp $ 5.5Y bond at T+100bp area
Country Garden raised $200m via a tap of their 2.7% 2026s at a yield of 3.04%, 35bp inside initial guidance of T+260bp. The bonds have expected ratings of Baa3/BBB-, and received orders over $1bn, 5x issue size. The bonds are fungible with their outstanding $500mn note. Proceeds will be used to refinance medium to long-term offshore debt due to mature within one year. The tap was priced 5bp over their initially issued 2.7% 2026s that yield 2.99% in secondary markets.
Sunac China raised $400mn via a 3.25Y non-call 2.25Y (3.25NC2.25) bond at a yield of 7%, 20bp inside initial guidance of 7.2% area. It also raised $100mn via a tap of their 6.5% 2026s at a yield of 7.3%, 20bp inside initial guidance of 7.5% area. The bonds have expected ratings of B1/BB-/BB, and received orders over $1.4bn, 3.5x issue size. The real estate company plans to use the proceeds for debt refinancing. The 3.25NC2.25s were priced 62bp over its 5.95% 2024s callable in January 2023 that yield 6.38%. The tapped bonds were priced 11bp over their initially issued 6.5% 2026s that currently yield 7.19% in secondary markets.
Far East Consortium International raised $150mn via a tap of their 5.1% 2024s at a yield of 4.25%, 37.5bp inside initial guidance of 4.625% area. The bonds have expected ratings of , and received orders over $900mn, 6x issue size. Asia took 99% of the bonds and EMEA 1%. Private banks received 59%, and asset managers, fund managers and financial institutions 41%. FEC Finance is the issuer and the Hong Kong-listed property developer is the guarantor. Proceeds will be used for refinancing, business development and general corporate purposes. The company concurrently plans to conduct an on-market repurchase of its outstanding $236.63mn 3.75% 2021s, subject to market conditions.
Housing and Development Board raised S$750mn ($554.6mn) via a 12Y bond at a yield of 1.865%. The bonds have expected ratings of AAA. HDB resized the issue from S$600mn to S$750mn. Proceeds will be used to support HDB’s development programmes and to fund working capital as well as refinance debt.
Zhejiang Provincial Energy raised $500mn via a 5Y bond at a yield of 1.737%, 45bp inside initial guidance of T+140 area. The bonds have expected ratings of A2/A+, and received orders over $4.9bn, 9.8x issue size. Proceeds will be used for refinancing and general corporate purposes. Moody’s on July 2 upgraded the issuer rating to A1 from A2 with a stable outlook, to reflect its high strategic importance to the Zhejiang government as the sole provincial energy vehicle as well as its dominant position in the province’s energy sector, as per IFR.
CLP Power Hong Kong raised $300mn via a 10Y bond at a yield of 2.253%, 25bp inside initial guidance of T+115bp area. The bonds have expected ratings of A1/A+, and received orders over $1.35bn, 4.5x issue size. CLP Power Hong Kong Financing is the issuer and CLP Power Hong Kong is the guarantor. Proceeds will be on-lent to the guarantor for general corporate purposes.
New Bonds Pipeline
Temasek subsidiary Vertex Venture hires DBS for S$ bond investor calls
CSI Properties hires banks for $ unrated bonds
CCB Financial Leasing hires for $ bonds
Adani Electricity Mumbai hires for $ 10Y sustainability-linked bond
Minmetals Land plans sustainable bond offering
- U.K.-Based Oil And Gas Producer EnQuest Rating Raised To ‘B-‘ From ‘CCC+’ By S&P On Refinancing Progress; Outlook Stable
- Fitch Upgrades Levi Strauss to ‘BB+’; Outlook Stable
- Moody’s upgrades NAB’s CFR to B1, outlook stable
- Sichuan Languang Downgraded To ‘D’ By S&P On Missed Bond Repayment
- Kuwait Projects Co. (Holding) K. S.C. Downgraded To ‘BB-‘ And ‘gcBBB-‘ By S&P; Outlook Negative
- Lenovo Group Ltd. Outlook Revised To Positive By S&P On Deleveraging And Improving Profitability; ‘BBB-‘ Rating Affirmed
- Fitch Revises Citizens Financial Group’s Outlook to Positive; Affirms IDR at ‘BBB+’
- Fitch Assigns First-Time IDR of ‘BB’ to Transportadora Associada de Gas S.A. – TAG; Outlook Negative
- Fitch Affirms and Withdraws Ratings on Offshore Drilling Holding, S.A
Term of the Day
A Kauri bond is a New Zealand dollar denominated security, issued and registered in New Zealand by a foreign entity. Kauri bonds are akin to Kangaroo/Yankee/Maple bonds.
IFC priced a NZD 600mn 5Y bond earlier today at a yield of 1.513%.