US equity markets ended higher on Friday with the S&P and Nasdaq up 0.2% and 1.4%. Sectoral gains were led by Communication Services and Consumer Discretionary that rose over 1.2% each. US 10Y Treasury yields were 1bp lower at 3.23%. European markets were mixed with the DAX up 0.7% while CAC and FTSE were down 0.1% and 0.4% respectively. Brazil’s Bovespa was down 2.9%. In the Middle East, UAE’s ADX closed 0.5% lower on Friday while and Saudi TASI was 4.4% lower on Sunday, following a 6% slump in crude oil prices. Asian markets have opened mixed – Shanghai was flat, STI and Nikkei were down 0.43% and 1.74% respectively while HSI was up 0.78%. US IG CDS spreads tightened 2.5bp and HY spreads were narrower by 11.8bp. EU Main CDS spreads were 0.5bp tighter and Crossover spreads were also narrowed by 4.7bp. Asia ex-Japan IG CDS spreads tightened 5.8bp.
New Bond Issues
New Bonds Pipeline
-
Linyi City Development Group hires for $ bond
- Korea Western Power hires for $ Green bond
- Kookmin Bank hires for € 3.5Y Sustainability bond
- Hanwha Energy mandates for $ green bond
- Busan Bank hires for $ Social bond
- Continuum Energy Aura hires for $ Green Bond
Rating Changes
- Moody’s affirms ICICI and Axis’ Baa3 deposit ratings; upgrades BCA to baa3 from ba1
- Geo Energy Resources Ltd. ‘B-‘ Ratings Withdrawn At The Company’s Request
- Banco De Sabadell Outlook Revised To Positive On Buildup Of Subordinated Bail-In-Able Debt Buffer; ‘BBB-/A-3’ Affirmed
Term of the Day: Haircut
Haircut refers to a reduction in value of an asset for the purpose of calculating either margin requirements, level of collateral or salvage value. The haircut is generally stated as a percentage and is the difference between the value of the asset and its reduced value. For example, in a restructuring, if a bond worth $100mn faces a haircut of 20%, then holders would receive only $80mn. In the case of a loan, if the collateral is worth $100mn, a haircut of 30% would imply that a loan of $70mn, giving the lender a cushion in case the market value of the collateral falls.
Talking Heads
On Fed’s Waller Backs 75 Basis-Point July Hike, Says Fed Is ‘All In’
“The Fed is ‘all in’ on re-establishing price stability. I don’t care what’s causing inflation, it’s too high, it’s my job to get it down. The higher rates and the path that we’re putting them on, it’s going to put downward pressure on demand across all sectors… Right now we’ve not seen inflation like this in 40 years and that’s the most important thing you’ve got to worry about.”
On Janet Yellen Saying Elevated US Inflation Locked In for the Rest of 2022
“We’ve had high inflation so far this year, and that locks in higher inflation for the rest of the year… These factors are unlikely to diminish immediately. There are so many uncertainties related to global developments… We have real strengths in this economy
On ECB’s Rehn Underscores Commitment to Contain Bond-Market Panic
“We are firmly committed to contain unwarranted fragmentation that would impair monetary-policy transmission.. We are fully committed to preventing fiscal dominance — and/or financial dominance, for that matter”
Wall Street Alarms Bell as 60/40 Set for Worse Quarter Than 2008
John Bilton, head of global multi-asset strategy at JPMorgan Asset Management
“If people are worried about growth, then bonds, at current yield levels, are now becoming a much better diversifier…When you stop worrying too much about inflation and go back to worrying a bit more about where growth lands, bonds are important for a portfolio.”
Christian Mueller-Glissmann, head of portfolio strategy and asset allocation at Goldman Sachs
“There is still potential for a bearish shock for Treasury yields…You need to come up with new ways to protect your portfolio and stop relying only on bonds.”
New York Fed Model Shows Chance of ‘Soft Landing’ At Just 10%
Federal Reserve Bank of New York economists
“According to the model, the probability of a soft landing — defined as four-quarter GDP growth staying positive over the next ten quarters — is only about 10%…Conversely, the chances of a hard landing — defined to include at least one quarter in the next ten in which four-quarter GDP growth dips below -1%, as occurred during the 1990 recession — are about 80%.
Top Gainers & Losers – 20-June-22*
