US equity markets ended lower on Thursday with the S&P and Nasdaq closing 0.5% and 1.6% lower each. Sectoral gains were led by Utilities, up 1.7% while losses were led by Consumer Discretionary, down 2.3%. European markets ended in the red too – DAX, CAC and FTSE were down 2.2%, 1.8% and 2.6% respectively. US 10Y Treasury yields fell 6bp to 1.80%. Brazil’s Bovespa ended flat. In the Middle East, UAE’s ADX was up 0.7% and Saudi TASI was up 0.8%. Asian markets have opened lower – Shanghai, HSI, STI and Nikkei were down 0.7%, 2.7%, 0.5% and 2.5% respectively. US IG CDS spreads widened 1.6bp and HY spreads were 6.9bp wider. EU Main CDS spreads were 0.3bp wider and Crossover CDS spreads were 10bp wider. Asia ex-Japan CDS spreads were 2.7bp tighter.

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New Bond Issues

  • Zhoukou Urban Construction Investment Develop $ 3Y at 5% area

HSBC raised $2.25bn via a two-trancher. It raised $1.75bn via a 4NC3 bond at a yield of 2.999%, 27bp inside initial guidance of T+160bp area. It also raised $500mn via a 4NC3 FRN at a yield of SOFR+143bp, 27bp as compared to initial guidance of SOFR equivalent. The bonds are rated A3/A-. Proceeds will be used for general corporate purposes. The new 4NC3 fixed-rate bonds were priced at a new issue premium of 13bp over its 1.645% bonds due April 2026 that are callable a year earlier, which currently yield 2.87%.  

Bank of America raised $2.5bn via a 15NC10 bond at a yield of 3.846%, 15bp inside initial guidance of T+215bp area. The bonds are rated Baa1/BBB+. The new bonds were priced ~15bp wider to its 2.482% bonds due September 2036 and callable in 2031, that currently yield 3.69%.

Honda Motor raised $2.75bn via a green three-trancher. It raised:

  • $1bn via a 3Y bond at a yield of 2.171%,~22.5bp inside initial guidance of T+80/85bp area 
  • $1bn via a 5Y bond at a yield of 2.534%, ~22.5bp inside initial guidance of T+100/105bp area
  • $750mn via a 10Y bond at a yield of 2.967%, ~25bp inside initial guidance of T+135/140bp area

The bonds have expected ratings of A3/A– (Moody’s/S&P). Proceeds will be used for eligible green projects.

Commonwealth Bank of Australia raised $4.5bn via a five-trancher. It raised

This was its largest-ever Yankee (Term of the day, explained below) transaction. The 10Y Tier 2 bond was rated Baa1/BBB+/A-. The five-trancher received orders over $9.3bn, over 2x issue size.

Sumitomo Mitsui Trust (SuMi Trust) raised $1bn via a two-part deal. It raised $500mn via a 3Y bond at a yield of 2.58%, 25bp inside initial guidance of T+115bp. It also raised $500mn via a 5Y green bond at a yield of 2.82%, ~24.5bp inside initial guidance of T+130/135bp areas. The bonds have expected ratings of A1/A (Moody’s/S&P), and received orders over $4.1bn, 4.1x issue size. Proceeds from the 3Y will be used for general corporate purposes and those from the 5Y green bond for financing and/or refinancing of existing and future qualifying environmental projects.


New Bonds Pipeline

  • Mumbai International Airport hires for $ bond
  • The Republic of the Philippines hires for $ bond
  • Aluminium Corporation of China hires for $ bond
  • Petron hires for $ 7NC4 bond
  • Electricity Generating (EGCO) hires for $ 7Y or 10Y bond


Rating Changes

Term of the Day

Yankee Bond

These are a type of Eurobond issued and traded in the US and denominated in USD. In essence, if a non-US based company issues a USD bond which is traded in the US, the bond is considered a Yankee bond. This is in comparison to a Eurodollar bond that is issued by a foreign entity denominated in USD, but the bonds are issued and traded outside of the US.

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Talking Heads

On UBS Says Junk Bonds Are Best Placed to Weather Geopolitical Storm

UBS strategists led by Matthew Mish

“High yield remains fundamentally solid. There are very limited signs of distress… HY outflows have stopped, dealer positions are well below average, and rising stars are lowering net debt”

High-yield debt in Europe and Asia “will offer the better total return prospects through year-end for patient investors”

On Germany Suspecting Bond Shortage Is Caused by Sanctioned Holders

A finance agency spokeswoman

“We have reason to believe that some of the securities are held by institutions that have been excluded from trading because of the current crisis. Today’s increase in the Federal Treasury note is our reaction to that in the interest of the market.”

Christoph Rieger, head of fixed-rate strategy, Commerzbank AG

“While this is not enough to affect the market as a whole, it can lead to dislocations in specific bonds. It is unclear whether the bonds and cash can be returned, raising the risk that collateral needs to be sold”

Althea Spinozzi, fixed-income strategist at Saxo Bank

“We are in a collateral squeeze. The market has to reset to reflect the sudden drop in tangible assets.”

On Latin America Bonds Trouncing Treasuries After Bold Rate Hikes

Eddy Sternberg, co-portfolio manager for emerging-market debt at Loomis Sayles

“High commodity prices are good for most South American economies’ external accounts, keeping currencies in check”

Cathy Hepworth, a portfolio manager at PGIM Fixed Income

“Does the Fed hiking extend the hiking cycle for these central banks? Not necessarily”

Top Gainers & Losers – 04-Mar-22*

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