US Treasury yields dropped yesterday with the 2Y yield down 12bp and the 10Y down 7bp. This comes on the back of economic data yesterday that points towards some indications of a slowing down of the US economy. Weekly initial jobless claims rose to 245k from 239k, its highest since November 2021. Also the Philly Fed Business Outlook number for April came at -31.3 vs. the surveyed -19.3. The peak Fed funds rate was 2bp lower to 5.10% for the June meeting. CME probabilities still continue to show expectations of a 25bp hike in the Fed’s May meeting. US IG and HY CDS spreads widened 1.9bp and 6.9bp respectively. US equity indices were lower with the S&P and Nasdaq down 0.6% and 0.8% respectively.

European equity markets ended mixed. European main CDS spreads widened 2.6bp and Crossover spreads were wider by 10.9bp. Asia ex-Japan CDS spreads widened by 3.3bp. Asian equity markets have opened with a negative bias this morning.

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New Bond Issues

New Bond Issues 21 Apr 23

Mexico raised $1.35bn via a 30Y bond at a yield of 6.338%, 40bp inside initial guidance of T+300bp area. The bonds have expected ratings of Baa2/BBB/BBB-. Mexico intends to use the net proceeds from the sale of the notes to retire outstanding debt through the purchase of tenders.

Pertamina Geothermal raised $400mn via a 5Y Green bond at a yield of 5.15%, 45bp inside initial guidance of 5.6% area. The bonds have expected ratings of Baa3/BBB-. Proceeds will be used to repay in full the company’s bridge facility and earmark net proceeds to finance or refinance, in whole or in part, new and/or existing eligible green projects as described in the company’s green financing framework. It is worth noting that this is a debut bond issuance for the Indonesian renewable energy producer, which is ultimately majority-owned by state oil and gas company Pertamina.


New Bonds Pipeline

  • Banco BTG hires for $ bond
  • Mauritius Commercial Bank hires for $ 5Y bond


Rating Changes

  • Moody’s changes Nordstrom’s outlook to negative; affirms Ba1 CFR

Term of the Day

Credit Default Swap (CDS)

A Credit Default Swap (CDS) is a financial contract between two counterparties that allows an investor to “swap” or offset the credit risk with another investor. CDS acts like an insurance policy wherein the buyer makes regular payments to the seller to protect itself from an issuer default. In the event of a default, the buyer receives a payout, typically the face value of the bond or loan, from the seller of the CDS as per the agreement. CDS spreads are a commonly used metric to track the market-priced creditworthiness of an issuer. A widening (increase) in CDS spreads indicates a deterioration in creditworthiness and vice-versa. China Huarong’s CDS spreads have shot up massively with default risks rising.


Talking Heads

On EM bonds offering value amid recession risks – UBS Wealth Management

As investors shift their attention from inflation to growth risks, we expect EM credit to perform well. We particularly like short-duration bonds for their attractive yields and more defensive nature. We also like bonds of energy exporters across the Gulf region and in other emerging markets. Finally, we see value in sustainable bonds of issuers with sound fundamentals… The recovery of Chinese economic growth is one of the reasons we hold a most-preferred rating on emerging market bonds in our global strategy”

On Fed’s Mester saying Rates Will To Move Somewhat Further Into Restrictive Territory

“Much closer to the end of the tightening journey than the beginning… it would be a mistake to declare victory before the job is done… higher interest rates and tightening financial conditions not fully impacted the economy yet… inflation expected to ease to 3.75% this year… job market strong, unemployment rate seen rising to 4.50%-4.75%”

On JPMorgan sees “non-trivial risk” of a technical default on U.S. Treasuries as debt ceiling looms

“Signs of stress typically start in the T-bill market 2-3 months before the X-date given money market funds (MMF), which are large holders of T-bills, will begin to more actively advertise that they don’t hold any bills that mature over those dates”


Top Gainers & Losers – 21-April-23*

BondEvalue Gainer Losers 21 Apr 23

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