US Treasury yields jumped higher across the curve, led by the 2Y yield that rose 14bp while the 10Y rose 7bp. The peak Fed funds moved 7bp higher to 5.08% for the June meeting with the probability of a 25bp hike in the May meeting now at 81% vs. 68% last week. While the exact reason for the move is not clear, FOMC non-voting member and known hawk, Thomas Barkin said that policymakers still have more work to get inflation back down to where they would like it to be. US Retail Sales for March saw a 1% drop MoM vs. expectations of a 0.5% drop, highlighting a slowdown in economic activity. US IG and HY CDS spreads tightened 0.9bp and 5.1bp respectively. US equity indices fell slightly with the S&P and Nasdaq lower by 0.2% and 0.4%.

European equity markets ended slightly higher. European main CDS spreads tightened 1.2bp and Crossover spreads were tighter by 5.7bp. Asia ex-Japan CDS spreads widened by 0.2bp. Asian equity markets have opened broadly mixed this morning.


New Bond Issues

  • Kookmin Bank $ 5Y at T+135bp area

New Bond Issues 17 Apr 23

Rabobank raised €1.25bn via a 6NC5 bond at a yield of 4.233%, 25bp inside initial guidance of MS+140bp area. The senior non-preferred bonds have expected ratings of A3/A-/A+.

Jinan Energy Group raised $210mn via a 364-day green bond at a yield of 6%, 50bp inside initial guidance of 6.5% area. The bonds are unrated. Proceeds will be used for financing and/or refinancing of eligible projects under the Green Finance Framework.


New Bonds Pipeline

  • ReNew Power mandates for $ bond
  • CK Hutchison mandates for $ 5Y and 10Y bond
  • Sumitomo Mitsui Finance and Leasing hires for $ 5Y
  • Damac Real Estate Development hires for $ 3Y Sukuk bond
  • Mauritius Commercial Bank hires for $ 5Y bond
  • Cargill hires for € 7Y bond
  • Abu Dhabi National Energy Company hires for $ 5Y/10Y Green bond 


Rating Changes

  • Guacolda Energia S.A. Credit And Debt Ratings Raised To ‘CCC+’ From ‘D’ On Tender Offer Closure, Outlook Negative
  • Moody’s downgrades Huarong AMC to Baa3; outlook stable


Term of the Day

Amortization of Debt

Amortization of debt refers to paying off debts via scheduled, pre-determined installments that include principal and interest over time. While the principal and interest amounts due on the amount borrowed will vary every payment date, the overall payment amount will be fixed each payment period. Large sized loans are amortized in order to make it easier to pay back the entire loan over an extended period of time.

Talking Heads

On Bond Buyers Seeing ‘Best Bang for Buck’ in EM as Hiking Cycles End\

Mauro Favini, Sr Portfolio Manager at Vanguard Group

“A structural allocation to local markets is one of the best ways to express your view in Latin America as the dollar weakens… Once the Fed starts cutting, it allows Latin American central banks to follow as there is less risk of local-currency depreciation as the dollar falls… much more scope for capital appreciation in Latin American bonds”

Ilke Pienaar, head of EM sovereign research at Pinebridge Investments

“EM local has done very well year-to-date on the back of the strong disinflation theme. We still think there is opportunity left, and we forecast healthy returns for local markets this year.”

On Bond Traders Scouring Bank Results for Signs of Increased Stress

Dominic Konstam, head of macro strategy at Mizuho Securities

“We are in a different sort of world now, a lending crunch is coming for loans. The bond market will not readily give up on the idea of a recession around the consumer and that the Fed has to reverse”

John Madziyire, portfolio manager at Vanguard

“The big question is when do we see the impact,” and it may require time of at least “a quarter or two. The reality is that the Treasury market is not pricing in a hard landing yet, in part because there is uncertainty about whether inflation falls below 3%”

On US banks may tighten lending and negate need for more rate hikes – US Treasury Secy Yellen

“Banks are likely to become somewhat more cautious in this environment. We already saw some tightening of lending standards in the banking system prior to that episode, and there may be some more to come… could be a substitute for further interest rate hikes that the Fed needs to make”

On Sri Lanka’s bondholders sending debt rework proposal to government: Sources

A committee of Sri Lanka’s international private creditors sent its first debt rework proposal to the country’s authorities regarding more than $12 billion in bonds outstanding… marks a first formal step to engage with the country’s authorities.

PBOC Governor Yi Gang

“If we can cooperate, if we can equally and fairly share the burden, I think we can solve the problem”


Top Gainers & Losers –17-April-23*

BondEvalue Gainer Losers 17 Apr 23

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