US equity markets dropped on Monday with the S&P and Nasdaq down 1.7% and 2.2% each. All sectors ended in the red led by Energy and IT down over 3% and 2.6% each. US 10Y Treasury yields jumped to a three year high of over 2.81%. European markets were also broadly lower – the DAX and FTSE were down 0.6-0.7% while CAC was up 0.1%. Brazil’s Bovespa ended 1.2% higher. In the Middle East, UAE’s ADX was up 0.7% and Saudi TASI was also up 0.7%. Asian markets have opened in the red too – Shanghai, HSI, STI and Nikkei were down 0.7%, 0.5%, 0.9% and 1.4% respectively. US IG CDS spreads widened 2.1bp and HY spreads were 10.4bp wider. EU Main CDS spreads were 1.4bp wider and Crossover CDS spreads were 4.1bp wider. Asia ex-Japan CDS spreads widened 3.6bp.
Markets now turn their focus to the US inflation metrics to be released today – CPI is expected at 8.4% YoY. Separately, Chinese banking credit growth expanded faster than expected in March. Banks extended RMB 3.13tn ($491bn) in new loans in March, up 153% MoM.
New Bond Issue
- Ascott Reit S$ 5Y SLB at 3.85% area
- Citic Securities $ 3Y at T+125bp area
- Yiwu State-owned Capital Operation $ 3.5Y at 4.5% area
Amazon raised $12.75bn via a seven-trancher. Scroll below for details.
Ascendas REIT raised S$208mn via a 7Y green bond at a yield of 3.468%, 28.2bp inside initial guidance of 3.75% area. The bonds are rated A3. Proceeds will be used to fund or refinance eligible projects under the Singapore-listed REIT’s green finance framework. Ascendas increased the cap on the issue size to S$208m from S$200mn.
MUFG raised $2bn via a three-trancher. It raised:
- $500mn via a 4NC3 bond at a yield of 3.837%, or T+112.5bp, ~25bp inside initial guidance of T+125/130bp area
- $800mn via a 6NC5 bond at a yield of 4.08%, or T+130bp, ~17.5bp inside initial guidance of T+145/150bp area
- $700mn via a 11NC10 bond at a yield of 4.315%, or T+155bp, ~22.5bp inside initial guidance of 170/175bp area
The bonds are rated A1/A-/A-. Proceeds will be used to fund the operations of MUFG Bank Ltd. and Mitsubishi Trust and Banking Corporation through loans that are intended to qualify as internal TLAC (Term of the Day, explained below) debt. If the bonds are not called by their call dates, coupons will reset to the 1Y CMT plus the initial credit spreads detailed above.
Korea Mine Rehabilitation and Mineral Resources raised $425mn 5Y bond at a yield of 4.14%, 25bp inside initial guidance of T+160bp area. The bonds are rated A1/A (Moody’s/S&P) and received orders over $1.45bn, 3.4x issue size. The bonds have a change of control event at 100 if the central government of Korea ceases to own and control at least 51% of the issuer. Proceeds will be used for general corporate needs, including the repayment of maturing debt, but will exclude any activities related to the development of coal mines.
Ascendas REIT raised S$208mn via a 7Y green bond at a yield of 3.468%, 28.2bp inside initial guidance of 3.75% area. The bonds are rated A3. Proceeds will be used to fund or refinance eligible projects under the Singapore-listed REIT’s green finance framework. Ascendas increased the cap on the issue size to S$208m from S$200mn.
MUFG raised $2bn via a three-trancher. It raised:
- $500mn via a 4NC3 bond at a yield of 3.837%, or T+112.5bp, ~25bp inside initial guidance of 4NC3 T+125/130bp area
- $800mn via a 6NC5 bond at a yield of 4.08%, or T+130bp, ~17.5bp inside initial guidance of T+145/150bp area
- $700mn via a 11NC10 bond at a yield of 4.315%, or T+155bp, ~22.5bp inside initial guidance of 170/175bp area
The bonds are rated A1/A-/A-. Proceeds will be used to fund the operations of MUFG Bank Ltd. and Mitsubishi Trust and Banking Corporation through loans that are intended to qualify as internal TLAC (Term of the Day, explained below) debt. If the bonds are not called by their call dates, coupons will reset to the 1Y CMT plus the initial credit spreads detailed above.
Korea Mine Rehabilitation and Mineral Resources raised $425mn 5Y bond at a yield of 4.14%, 25bp inside initial guidance of T+160bp area. The bonds are rated A1/A (Moody’s/S&P) and received orders over $1.45bn, 3.4x issue size. The bonds have a change of control event at 100 if the central government of Korea ceases to own and control at least 51% of the issuer. Proceeds will be used for general corporate needs, including the repayment of maturing debt, but will exclude any activities related to the development of coal mines.
New Bonds Pipeline
- China Citic Bank International hires for $ AT1
- Orix Corp hires for € 300/300 mn 4Y Green/8Y bond
- Yunnan Provincial Energy hires for $ green and SLB bond
- Korea Water Resources hires for $ Green bond
- Mirae Asset Securities hires for $ 3Y senior and/or 5Y sustainability-linked bond
- Towngas Smart Energy hires for $ 5Y/10Y SLB
- Korea Midland Power hires for $ bond
- Jubilant Pharma hires for $ bond
- Sael Limited hires for $ 7Y Green bond
- Kalyan Jewellers India hires for $ bond
Rating Changes
- OCI Upgraded To ‘BBB-‘ From ‘BB+’ On Strong Performance And Debt Reduction; Outlook Stable; Proposed Debt Rated ‘BBB-‘
- Warner Media LLC Downgraded To ‘BBB-‘ Following Merger With Discovery; Issue Ratings Also Lowered To ‘BBB-‘
- ENN Energy Outlook Revised To Positive On Resilient Profits, Strengthening Parent Credit Profile; ‘BBB’ Ratings Affirmed
Term of the Day
TLAC
Total Loss Absorbing Capacity (TLAC) is an international standard designed for banks, particularly Global Systemically Important Banks (G-SIBs) by the Financial Stability Board (FSB) in 2015 to ensure that these banks have ample equity and bail-in debt in place to minimize tax payer and government bailout mechanisms. Securities eligible under TLAC include common equity, subordinated debt, some senior debt and unsecured liabilities with a maturity greater than one year. FSB requires that 33% of TLAC be filled with debt securities and a maximum of 67% with equity.
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Talking Heads
On Fed’s Evans Says Half-Point Rate Hike Worth Debating to Get to Neutral
A 50bp hike “is obviously worthy of consideration. Perhaps it’s highly likely, even…“If you want to get to neutral by December, that would probably require something like nine hikes this year, and you’re not going to get that if you just do 25 at each meeting,” Evans said. “So, I can certainly see the case.”
On Singapore to Tighten Policy Amid Inflation Fight: Decision Guide
Khoon Goh, Singapore-based head of Asia research for ANZ
“Tightening resource pressures in the economy and upside inflation risks mean the MAS has to be more forceful in normalizing monetary policy”
On End of ECB Bond Purchases Not Priced In – Goldman Strategists
“The ECB’s end of QE will fuel a material increase in the net supply of fixed income securities that will be available to private investors. Prices will need to adjust in order to attract the marginal buyer. Purchases of high-quality bonds had incentivized investors to rotate into riskier and higher carry assets. Going forward, the case for being overweight high carry securities has weakened.
On Brazil Central Bank Head Campos Neto Says Was Surprised by Inflation Data
Brazil central bank President Roberto Campos Neto
“We are analyzing this surprise to see if it changes anything regarding the trends”. consumer price increases “were the most widespread we’ve seen. Most of what we’ve done so far on interest rates will have an impact in the coming months”
Carlos Menezes portfolio manager at Gauss Capital
“He signaled the cycle will continue”
Top Gainers & Losers – 12-Apr-22*
