US markets carved another day of gains as the second half of 2021 kicked off. Jobless claims for the prior week were at 364k, the lowest since the onset of the pandemic. S&P was up 0.5% and the tech heavy Nasdaq was up 0.1%. Most sectors were in the green led by Energy, up 1.7% and Healthcare up 0.9%. US 10Y Treasury yields were stable at 1.47% and investors look forward to the NFP report for June that will be released later today. European markets closed higher buoyed by the sharpest rise in manufacturing activity since 1997. Markit’s Eurozone final manufacturing PMI stood slightly better at 63.4 against estimates of 63.1 – FTSE up 1.3%, CAC up 0.7% and DAX up 0.5%. US IG and HY CDS spreads tightened 0.1bp and 0.7bp respectively.  EU main and crossover CDS tightened 0.6bp and 2.5bp respectively. Saudi TASI was largely flat and Abu Dhabi’s ADX was up 0.9%. Brazil’s Bovespa was down 0.9%. Asian markets are again looking for direction – Singapore’s STI and Nikkei were up 0.4% and 0.3% respectively while HSI and Shanghai were down 0.7% and 0.3% respectively. Asia ex-Japan CDS spreads were 0.3bp wider.

New Bond Issues

New Bond Issues 2 Jul (1)

Turkey raised €1.5bn via a 6Y bond at a yield of 4.5%, 25bp inside initial guidance of 4.75% area. The bonds were unrated. The bonds were priced 45bp over to its 5.2% bonds due 2026 that yield 4.06%. The bonds were issued after raising $2.5bn via a 5Y Sukuk issuance a few weeks earlier at a yield of 5.125%

SocGen raised €1bn ($1.18bn) via a 6Y bond at a yield of 0.266%, 20bp inside initial guidance of T+65bp area. The bonds have expected ratings of A1/A/A received orders over €1.5bn, 1.5x issue size.


New Bond Pipeline

  • Fujian Investment & Development Group hires for $ bond issue
  • Hyundai Assan Otomotiv Sanayi hires for US$ 5yr bond with HMC guarantee
  • Korea Gas Corp hires for $ 5Y and/or 10Y bond
  • Laos plans $ bond offering; to repay 2021s


Rating Changes


ICYMI: 67% Dollar Bonds Trade Higher in Q2, Staging a Recovery from Q1

In case you missed it, click on the button below to read the report for the quarter ended June with box and whisker plots of price returns of investment grade and high yield bonds, largest deals and top gainers and losers.


Term of the Day


SONIA stands for the Sterling Overnight Interest-rate Average, and refers to the overnight interest rate at which banks would lend funds in the interbank markets, denominated in Sterling. This is considered an effective benchmark and has been identified to replace the GBP LIBOR that will be discontinued from 2022. SONIA is similar to the EONIA rate that will replace the Euribor in Europe.

UOB said that it received approval from bondholders to convert the benchmark reference for its £350mn (S$650.7mn) floating-rate covered bonds due 2023 to SONIA from GBP LIBOR.


Talking Heads

Christine Lagarde, European Central Bank President
“The improved economic outlook on the back of rapid progress in vaccination campaigns has reduced the probability of severe scenarios.”
Andrea Enria, Chairman of the European Central Bank Supervisory Board
“We expect distribution plans to remain prudent and commensurate with banks’ internal capital generation capacity and with the potential impact of a deterioration in the quality of exposures, also under adverse scenarios.” “Which should be helpful for sector sentiment.”
In a report by JPMorgan Chase & Co analysts
“We see investors’ focus increasingly shifting to dividends where we expect a decision in favor of lifting dividend restrictions.” Clarity on “future cash dividends is key for investors.”
Andrew Bailey, Bank of England Governor
“Our current view is that the economy will revert to the lower average underlying growth rates that we have seen since the financial crisis.” “Reverting to the pre-Covid pattern of lower trend growth will bring its own challenges.” “It is important not to over-react to temporarily strong growth and inflation, to ensure that the recovery is not undermined by a premature tightening in monetary conditions,” Bailey said. “We could see wage pressures arising if the number of people in worker or seeking work does not return to pre-Covid levels and inactivity remains at a higher level.” Bailey is watchful for “signs of more persistent pressure and for a move of medium term inflation expectations to a higher level.” “If we see those signs, we are prepared to respond with the tools of monetary policy.”
Valentin Marinov, Credit Agricole’s head of G-10 FX research
“The one thing that was propping up the pound in the face of the resurgent Covid pandemic was the expectation the BOE will start normalizing its rates next year.” “It is unlikely to grow into a tightening cycle in 2023,”
“Managing this transition — from providing reassurance that monetary policy will continue to deliver powerful support to the economy to preparing for an eventual scaling back of asset purchases and a withdrawal of monetary accommodation — will require deft communications under a potentially tight timeline.” “The unprecedented fiscal and monetary support, combined with the receding Covid-19 case numbers, should provide a substantial boost to activity in the coming months,” the IMF said. “Savings will be drawn down, demand will return for in-person services, and depleted inventories will be rebuilt.”

On the risk in the record $535 billion junk bond issuance as borrowing costs fall to new lows

Todd Schubert, head of fixed-income research at Bank of Singapore

“GDP growth momentum should underpin investment in risk assets.”
Jeremy Selway, Deutsche Bank’s head of European Leveraged Finance Capital Markets
“We see activity continuing to be very buoyant.” “A lot of private-equity firms didn’t deploy money last year so have to catch up this year, and there are more and bigger buyouts than we have seen in some time, and quite a lot of public to private transactions.”
Per Wehrmann, head of European high-yield at money manager DWS Group
“They can only afford to pay it raising also subordinated debt at relatively low cost and that’s why the leverage is much higher than in the past, which is also
something you have to be more selective on.”
Sander Bus, co-head of credit at Dutch money manager Robeco
“Of course fundamentals are great now and the economy is growing and every company can refinance.” “But before those bonds mature the world will have changed again and a big percentage of CCC will ultimately end up in default, and it is difficult to say which bonds exactly you need more compensation than you currently get.”
Daniel Ender, credit analyst at Actiam NV
“Most companies are moving into the direction of making their capital structures more sustainable.” “Investors are looking more closely into sustainability in their investment decisions and corporates who show they are committed to changing their business model to be more sustainable and future proof are favored.”
Arthur Krebbers, head of sustainability, corporates at NatWest Markets
“Larger issuers doing these type of exercises could lead to material increases in the volume of sustainable debt that is outstanding.” “If you see for example a government, a development bank or a major automotive do a sustainable liability management exercise, then suddenly you can have multiple billions of incremental ESG-labeled debt outstanding.”
Lee Mi Seon, analyst at Hana Financial Investment
“There is definitely a merit in investing in Korean bonds versus Treasuries, now that the yield gap between the two has widened even more within a short period.” “Inflows are expected to continue for the time being as U.S. short-term yields are likely to stay low at least until the Fed starts to raise interest rates too.”
Eugene Leow, fixed-income strategist at DBS Group Holdings
“For Indonesia and India, investors are stuck between multiple conflicting forces including a hunt for yield, Covid-19 worries and Fed taper concerns.”

Top Gainers & Losers – 02-Jul-21*

BondEvalue Gainer Losers 2 Jul (1)
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