US markets witnessed a sell-off on Tuesday as July retail sales declined – Nasdaq and S&P were down 0.9% and 0.7% respectively. Consumer Discretionary, down 2.3% was the worst hit, followed by Materials, Industrials, Communication Services, Energy, IT and Financials, all down more than 0.8% while Healthcare, up 1.1% outperformed. European markets were mixed – FTSE ended 0.4% higher while CAC ended 0.3% lower and DAX was broadly flat. Saudi’s TASI and UAE’s ADX closed higher by 0.6% and 0.9% respectively. Brazil’s Bovespa, down 1.1% continued its downward rally. APAC stocks had a positive start – Singapore’s STI, Nikkei, HSI and Shanghai were up 0.9%, 0.7%, 0.4% and 0.2% respectively even as Chinese regulators issued draft anti-monopoly rules. US 10Y Treasury yields widened 1bp to 1.27%. US IG and HY CDS spreads widened 0.9bp and 6.4bp. EU Main and Crossover CDS spreads widened 0.4bp and 2.2bp respectively. Asia ex-Japan CDS spreads were 0.3bp tighter.
In the US, retail sales in July dropped 1.1% vs. expectations of a 0.3% drop pulling the market sentiment down, with the decline led by automobiles. Sales declined 0.4% excluding automobiles.
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New Bond Issues
- HDFC Bank $ PerpNC5 AT1 at 4.125% area
- Ping An International Financial Leasing $ 3Y at 3% area
- China Jianyin Investment $ 3Y at T+150bp area
- Henan Investment Group $ at 2.9% area
- Baidu $ 5.5Y/10Y debut sustainability bond at T+115bp/T+150bp areas
New Bonds Pipeline
- Perusahaan Pengelola Asset hires for $ bond
- Anhui Transportation Holding Group hires for $ bond
- Shandong Gold Group $ bond
- Fitch Upgrades CF Industries to ‘BBB-‘; Outlook Stable
- Hanjin International Upgraded To ‘B-‘ By S&P On Ongoing Parental Support; Outlook Is Negative
- Continental Resources Inc. Outlook Revised To Positive By S&P On Improved Credit Measures, Debt Repayment; Ratings Affirmed
- PT Bayan Resources Tbk. Outlook Revised To Positive By S&P On Expansion Prospects, Financial Prudence; Rating Affirmed At ‘B+’
- Fitch Revises Outlook on Atento Luxco to Stable; Affirms IDR at ‘B+’
- Aramark Outlook Revised To Negative From Stable By S&P On Susceptability To Pandemic-Related Risks; Ratings Affirmed
Term of the Day
Subordinated debt refers to any type of debt that rank below senior debts on the capital structure. In the event of liquidation, holders of subordinated debt would only be paid after all the senior debt is repaid. Thus, the ratings and yield of subordinated debt tend to be lower and higher respectively, to account for the greater risk associated with subordinated vs. senior debt. There are different kinds of subordinated debt that can include perpetuals/AT1s, payment-in-kind notes, mezzanine debt, convertible bonds, vendor notes etc. Subordinated debt rank higher to preferred equity and common equity in the capital structure. LMIRT’s 7% Perp is a subordinated bond.
“Investors should make sure it is not just chatter about the taper that they pay attention to.” “Rising economic inequality matters to bonds because it is one of the longer-run structural drivers that has contributed to rates being so low.”
Top Gainers & Losers – 18-Aug-21*