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US Treasury yields were broadly flat across the curve on Wednesday. US initial jobless claims fell by 24k to 209k in the week ending November 18, better than the estimated 227k. Durable Goods Orders fell 5.4% YoY, worse than expectations of a 3.2% drop. Capital Goods Orders also dropped, by 0.1%, lower than expectations of a pick-up by 0.1%. US credit markets saw IG CDS spreads tighten 1.3bp and HY spreads tighten by 6.6bp. S&P and Nasdaq rose 0.4-0.5% respectively, ahead of the Thanksgiving holidays
European equity markets were stable. In credit markets, European main CDS spreads were tighter by 1.1bp and crossover spreads tightened by 6.2bp. Asian equity markets have opened mixed today. Asia ex-Japan IG CDS spreads were wider by 3.2bp.
China Construction Bank (CCB) raised $1.1bn and €300mn via a three-part deal across three different branches.
The senior unsecured bonds have expected ratings of A1 (Moody’s). Proceeds will be used to finance/refinance loans to customers involved in, as well as the bank’s own operational activities in, eligible green projects.
Banco BPM raised €500mn via a 4Y social senior preferred bond at a yield of 4.676%, 35bp inside initial guidance of MS+190bp area. The bonds have expected ratings of Baa2/BBB-/BBB-, and received orders over €1.9bn, 3.8x issue size. The notes have a a 75% clean-up call. Proceeds will be used to finance/refinance Eligible Social Loans as defined within the Issuer’s Green, Social & Sustainability Bonds Framework. The new bonds are priced 8.6bp wider to its existing 4.875% green bonds due 2027 that yield 4.59%.
A clean-up call refers to a call provision, whereby once a stated percentage of a security is retired, the issuer is obliged to call the remainder of the tranche. While clean-up calls are generally more commonly observed in mortgage-backed securities (MBS), they may also be present as a feature in some bonds. This is different from a normal call option in a bond where the issuer has an option to redeem their bond fully during the specified call date./period.
On Expecting to Rate More Private Credit as Debt Concerns Rise – S&P Global
“There will be much more demand from the LPs to say, ‘we want to really understand what is the risk that you have taken in your portfolio,’ and someone needs to do that objectively… Private credit hasn’t really been tested through a credit cycle. There will be a lot of investors in private credit funds that will experience a loss of principal”
On Big investors saying US markets rally could prove short-lived
Ryan Israel, CIO of Pershing Square Capital
“We’ve started seeing some signs that things are a little weaker than what people may believe”
Mohamed El-Erian, adviser to financial services firm Allianz SE
Markets may have “gone too far in extrapolating” rate cuts in early 2024
Peter van Dooijeweert, head of defensive and tactical alpha at Man Group’s Solutions
“I don’t think that the market is going to dodge a very aggressive Fed tightening cycle and then continued quantitative tightening environment without a little bit of damage coming sometime next year”
On China property distress driving up Asian HY default rates
Arvind Subramaniam, senior analyst at Morningstar
“The elevated level of defaults can be chiefly attributed to the distress in the Chinese property sector, which has suffered due to macroeconomic headwinds, slumping property sales, and mounting liquidity challenges”
Gary Ng, senior economist at Natixis
“The liquidity of private developers continues to dry up slowly”