Equities rallied again with S&P up 1.1% and Nasdaq up 1.3%. US macro data surprised to the upside – retail sales in March exploded 9.8% higher, the highest in 10 months and jobless claims for the prior week fell 193k to 576k. Despite the strong macro data, US 10Y yields tumbled 8bp to 1.55%, its lowest in over a month. European equities also gained with the FTSE, DAX and CAC up 0.6%, 0.3% and 0.4%. US IG CDS spreads were 1.2bp tighter and HY was 6.5bp tighter. EU main CDS spreads were 0.7bp tighter and crossover spreads tightened 3bp. China’s GDP grew by a record 18.3% YoY in Q1 2021 – fixed asset investments rose 25.6% and industrial production grew 24.5%. Asian equity markets are mixed today and Asia ex-Japan CDS spreads are 6bp wider.
New Bond Issues
- Seaspan $300mn 5Y SLB at 6.5% area
- Shandong Marine Group $ 3Y at 4.8% area
Times China raised $200mn via a 363-day note at a yield of 5.3%. The notes have expected ratings of BB-. The Chinese real estate company plans to use proceeds for offshore debt refinancing.
CCB HK branch raised $1.5bn via a two-tranche sustainability-linked bond (SLB) offering. It raised $600mn via a 3Y bond at a yield of 0.878%, 35bp inside initial guidance of T+90bp area. It also raised $500mn via a 5Y bond at a yield of 1.482%, 32bp inside initial guidance of T+100bp area. The bonds have expected ratings of A1, and received orders over $2.65bn, 4.8x issue size.
Goldman Sachs raised $6bn via a two-part deal. It raised $3.75bn via a 11Y non-call 10Y bond (11NC10) at a yield of 2.615%, 20bp inside initial guidance of T+125bp. It also raised $2.25bn via a 21NC20 bond at a yield of 3.41%, 20-25bp inside initial guidance of T+120/125bp area. The bonds have expected ratings of A2/BBB+. Proceeds will be used for general corporate purposes. The 11NC10s are callable at par any day on or after January 22, 2032 and have a make-whole call (MWC) (Term of the day, explained below) any day on/after October 22, 2021, excluding April 22, 2031. The 21NC20s are callable at par any day on/after January 22, 2041 and have a make-whole call (MWC) any day on or after October 22, 2021, excluding 22 Apr 2041.
New Bond Pipeline
-
China Water Affairs Group $ green bond
-
BOC Aviation $ bond
- Putian State-owned Asset Management $ bond
- IRFC $ 5Y bond
Rating Changes
- Argentine Power Company YPF Energia Electrica Upgraded To ‘CCC+’ From ‘SD’ By S&P On Debt Exchange Completion, Outlook Stable
- Moody’s upgrades Netflix’s CFR to Ba1 from Ba3; the outlook is positive
- Moody’s upgrades RWE to Baa2; stable outlook
- Fitch Downgrades Yinchuan Tonglian Capital Investment Operation to ‘BBB-‘ From ‘BBB’; Outlook Stable
- Fitch Revises Outlook on Macao to Stable; Affirms at ‘AA’
- CPI Property Group S.A. Ratings Placed On CreditWatch Negative By S&P On Plan To Acquire A Further Stake In Globalworth
- Foot Locker Inc. Outlook Revised To Stable From Negative By S&P On Stronger-Than-Expected Performance; ‘BB+’ Rating Affirmed
- Fitch Affirms Simpar, JSL and Vamos Ratings; Outlook Revised to Positive
- Correction: Fitch Places Huarong Industrial’s ‘BBB+’ Ratings on Rating Watch Negative
Term of the Day
Make Whole Call (MWC)
A Make Whole Call (MWC) is a type of call option on a bond that gives the issuer the right to redeem a bond before its maturity date by compensating (making whole) bondholders for future coupon payments. MWC provisions were introduced in the 1990s and are rarely exercised by issuers. If exercised, the issuer has to pay a lump sum amount to the bondholders that represent the net present value of future foregone coupon payments, typically stated as a formula in the bond prospectus.
MWCs are different from traditional call options in that investors are compensated for foregoing future coupon payments. With traditional call options, the issuer can exercise the call option at the predefined call price without having to pay bondholders for foregoing future coupons. This makes MWCs beneficial to bondholders as compared to traditional call options and are typically expensive for the issuer to exercise.
Both the bonds in Goldman’s $6bn two-tranche bond offering issued yesterday have MWCs.
Talking Heads
Top Gainers & Losers 16-Apr-2021*
