US equity markets began the week mixed with the S&P up 0.1% and Nasdaq down 0.4% on Monday. Sectoral gains were led by Energy, up 3.7% and Utilities up 1.2%; Consumer Discretionary was down 0.9%.  US 10Y Treasury yields moved 1bp higher to 2.79%. European markets were mixed – DAX was down 0.3%, while the CAC and FTSE were up 0.3% and 0.4% respectively. Brazil’s Bovespa trended 1.4% higher. In the Middle East, UAE’s ADX and Saudi TASI fell 0.8% each. Asian markets have opened mixed – Shanghai and HSI were up 0.8% and 1.4% respectively while Nikkei and STI were flat. US IG CDS spreads tightened 0.6bp and US HY spreads were tighter by 0.5bp. EU Main CDS spreads were 0.1bp tighter and Crossover spreads were tighter by 1.8bp. Asia ex-Japan IG CDS spreads tightened 7.2bp.

All eyes are now on the FOMC meeting on 26-27 July, where market participants are pricing in a 77.5% probability of another 75bp rate hike, as per CME data.

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New Bond Issues

New Bond Issues 26 Jul 22

Royal Bank of Canada raised $2.75bn via a two-tranche deal. It raised

  • $1.5bn via a 2Y bond at a yield of 3.97%, 20bp inside the initial guidance of T+115bp area.
  • $1.25bn via a 5Y bond at a yield of 4.24%, 20bp inside the initial guidance of T+155bp area. The new bonds are priced at a new issue premium of 15bp over its existing 3.625% 2027s that currently yield 4.09%.
The senior unsecured bonds have expected ratings of A1/A. Proceeds will be used for general corporate purposes.

American Express raised $3.5bn via a two-tranche deal. It raised

  • $2.25bn via a 3Y bond at a yield of 3.986%, 25bp inside the initial guidance of T+125bp area.
  • $1.25bn via a 11NC10 fixed-to-floating bond at a yield of 4.42%, 30bp inside the initial guidance of T+190bp area.
The senior unsecured bonds have expected ratings of A2/BBB+. Proceeds will be used for general corporate purposes.

TD Bank raised €2.25bn via a two-tranche deal.

  • TD Bank raised €1bn via a 5Y bond at a yield of 2.551%, 10bp inside the initial guidance of MS+115bp area.
  • TD Bank raised €1.25bn via a 10Y bond at a yield of 3.129%, 15bp inside the initial guidance of MS+145bp area.

The senior unsecured bonds have expected ratings of A1/A, and received orders over €3.65bn, 1.6x issue size.

Lotte Property raised $300mn via a guaranteed 3Y Green & Sustainability bond at a yield of 4.525%, 35bp inside the initial guidance of T+190bp area. The bonds have expected ratings of Aa3 (Moody’s). Proceeds will be used to fund or refinance new and/or existing eligible assets under its sustainable finance framework.


New Bonds Pipeline

  • Posco hires for $ 3Y and/or 5Y bond
  • Busan Bank hires for $ Social bond


Rating Changes


Term of the Day

Special Drawing Rights (SDR) 

Special Drawing Rights (SDR) issued by the IMF to its member countries’ central banks are a reserve asset that can be exchanged for hard currencies with another central bank. The value of an SDR is set daily based on a basket of five major international currencies: the USD (42%), the EUR (31%), the CNY (11%), the JPY (8%) and the GBP (8%). An allocation of SDRs requires approval by IMF members holding 85% of the total votes and US is the biggest holding 16.5% of the votes.

The IMF is in discussion with Pakistan about the potential transfer of Special Drawing Rights (SDR) worth 2bn ($2.6bn).


Talking Heads

On the World’s Worst Airline Bonds Being in Latin America Following Dollar Jumps

Ray Zucaro, chief investment officer at RVX Asset Management

“Sentiment is horrible…Currency weakness, dollar debt, higher fuel costs and economic slowdown are a recipe for turbulent flying ahead.”

On Key Argentina Creditor Hinting at Withholding New Funding

Mauricio Claver-Carone, president of the Inter-American Development Bank

“Argentina’s tumultuous financial record uniquely affects the bank’s costs…As much as the IDB wants to approve new funds for Argentina, it cannot rubber-stamp requests to do so without prudently ensuring it has a development impact.”

Rafael Elias, managing director of Latin American corporate credit strategy at Banctrust & Co.

“Passing through these cost increases to the end consumer is more complicated and typically takes time. Many, if not most, travelers usually pay with their credit cards, and if you carry a balance, the rates these cards charge can be prohibitive.”

On ECB Rate Increases

Ignazio Visco, Governor of the Bank of Italy

“We will see depending on data how to go on, but this does not mean that we are not going to proceed in a gradual way…Gradualism means moving step by step, not being very slow…there is no way now to say now whether the ECB’s next step should be a quarter-point or half-point increase”

On ECB’s New Bond Tool That ‘Plugs Gap’ Between Instruments

Martin Kazak, Governor of the Central Bank of Latvia

“TPI, in my view, plugs the gap between the PEPP reinvestment flexibility and OMT…I don’t think that it would be necessary to come up with very detailed and specific manuals on each and every situation that may arise…You can’t forecast the future to the precise details…It’s not one single variable that would automatically switch on the program…There is a set of variables and data that we look at. We will know fragmentation when we see it.”

On U.S. Treasury officials saying overall economic strength belies weak GDP

“On the whole, our view is that the data strongly suggest we are not currently in a recession, and that this year’s first quarter growth was likely favorable when looking at income, employment, and overall production.”

Top Gainers & Losers – 26-July-22*

BondEvalue Gainer Losers 26 Jul 22

Other News

OUE Commercial Reit 1H 2022 DPU falls 12.2 per cent on lower net property income

Mapletree Industrial Trust reports 4.2% year-on-year gain in Q1 DPU to 3.49 cents

CapitaLand China Trust posts 3.1% drop in H1 DPU to S$0.041

HDFC plans to raise up to $1.4bn via onshore bonds issue

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