Bond markets sold-off further on Monday with benchmark yields higher by 6-9bp across the curve, continuing the climb post the strong jobs report. The peak Fed funds rate rose 6bp to 5.12% for the June 2023 meeting. Currently, the probability of a 25bp hike at the FOMC’s March meeting stands at 97%. All eyes are now on Fed chair Powell, who will be speaking at the Economic Club later today, for clues on the future path of interest rates. US IG CDS spreads widened by 1.1bp while HY spreads were 7.1bp wider. Equity indices moved lower along with bonds on Friday with the S&P and Nasdaq down 0.6% and 1% respectively on Monday.
European equity markets also ended lower. The European main and crossover CDS spreads widened by 2.8bp and 15.1bp respectively. Asian equity markets have opened in the green today. Asia ex-Japan CDS spreads were 5.2bp wider.
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New Bond Issues
Deutsche Bank NY raised $1.5bn via a 11NC10 bond at a yield of 7.079%, 40bp inside initial guidance of T+385bp area. The subordinated Tier 2 notes have expected ratings of Baa3/BB+/BBB-. Proceeds will be used for strengthening of regulatory capital base and general corporate purposes. The new bonds are priced at a new issue premium of 18.9bp to its existing 3.742% 2033s that yield 6.89%.
Ford Motor Credit raised €1bn via a Long 4Y bond at a yield of 4.875%, 50bp inside initial guidance of 5.375%. The senior unsecured bonds have expected ratings of Ba2/BB+/BB+. Proceeds will be used for general corporate purposes.
Wanda Properties raised $300mn via a 3Y bond at a yield of 12.375%, 12.5bp inside initial guidance of 12.5% area. The senior unsecured bonds have expected ratings of Ba3/BB. Proceeds will be used for refinancing existing indebtedness.
T-Mobile raised $3bn via a three-tranche deal. It raised
- $1bn via a 5Y bond at a yield of 4.998%, 27bp inside initial guidance of T+145bp area.
- $1.25bn via a Long 10Y bond at a yield of 5.072%, 27bp inside initial guidance of T+170bp area.
- $750mn via a tap of its existing 5.65% 2053s at a yield of 5.351%, 30bp inside initial guidance of T+195bp area.
The newly issued senior unsecured bonds have expected ratings of Baa3/BBB-/BBB-, in line with the ratings of the existing 2053s. Proceeds will be used for general corporate purposes, which may include share repurchases and refinancing of existing indebtedness on an ongoing basis.
New Bonds Pipeline
- Khazanah Nasional Bhd hires for $ bond
Rating Changes
Term of the Day
Exchangeable Debt
Exchangeable debt is a type of debt that gets converted into the common stock of a target firm in which the issuing firm has an ownership position. It signifies a potential change in the issuing company’s asset composition via the divesting of its ownership stake in the target firm.
Talking Heads
On The Man Behind Pimco’s Great Debt Bet Closes In on His Next Big Trade
“Our mindset is be willing to be average – for a time – and protect capital and then look to be a top cohort performer. You need significant dislocations in the market to go on offense to generate strikingly high differentiated returns.
Eric Jacobson, a fixed-income strategist at Morningstar
“It’s inevitable… that they’re going to have a hard time maintaining this level of exposure” to the mortgage sector”
On Deutsche Bank’s Buybacks at Risk on ECB Scrutiny – Citi
“We have argued for some time that Deutsche Bank’s corporate risk-weights appear low relative to European peers”
On Collateral Scarcity Fears Resurface in Europe With ECB Waiver Set to End
Sphia Salim, head of European rates strategy at Bank of America
“Our discussions with investors in December and early January suggested that not many were preparing for the return to 0% remuneration by end of April”
On ‘You don’t have a recession’ when U.S. unemployment at 53-year low – Yellen
“You don’t have a recession when you have 500,000 jobs and the lowest unemployment rate in more than 50 years. What I see is a path in which inflation is declining significantly and the economy is remaining strong.”
Top Gainers & Losers – 07-February-23*
