Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers

by | Aug 27, 2021 | Credit Ratings, Macroeconomic news

New Bond Issues-Bond Update-Top Gainers And Losers
US markets fell more that half a percent ahead of the Jackson Hole meeting with the S&P and Nasdaq closing ~0.6% lower. All sectors except Real Estate closed in the red. Energy down 1.5% led the losses followed by Consumer Discretionary, Communications Services, Materials and IT which lost more than 0.5%. European markets closed lower as well – DAX was down 0.4% and FTSE and CAC were down 0.3% each. UAE’s ADX and Saudi’s TASI also moved lower by 0.5% and 0.3% respectively. Brazil’s Bovespa lost 1.7%. Asian markets were mixed – Shanghai and HSI were up 0.5% and 0.3% while Singapore’s STI and Nikkei edged 0.8% and 0.3% lower. US 10Y Treasury yields were flat at 1.34%. US IG widened 0.7bp while HY CDS spreads tightened 3.8bp. EU Main and Crossover CDS spreads also widened 0.4bp and 1.4bp respectively and Asian ex-Japan CDS spreads tightened by 0.5bp.

 

The US initial jobless claims recorded 353k, 3k higher than the 350k expected and higher vs. 349k in the previous week. The 4-week average came at 366.5k vs. 378k in the previous period. Chinese industrial production for July came in at 16.4% vs. 20% in 2020. Singapore’s industrial production for July posted 16.3% vs. expectation of 20.2% and against last year’s 28%.
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New Bond Issues

New Bond Issues 27 Aug (1)

Agile Group Holdings raised $400mn via 364-day notes at a yield of 4.85%, 40bp inside the initial guidance of 5.25% area. The unrated bonds received orders over $2bn, 5x issue size. Asian investors were allotted 97% and EMEA 3%. Fund/Asset managers and pension funds received 60%, banks and financial institutions 22% and private banks 18%. Proceeds will be used for debt refinancing and general corporate purposes. Agile’s new bonds offer a new issue premium of 40bp over its older 5.125% bonds due August 2022 that are currently yielding 4.45%.

Yuzhou Group raised $200mn via 1.75Y non-call 1Y green bonds at a yield of 9.966% on Thursday. The bonds have an expected rating of B+ by Fitch, in line with the issuer rating as per IFR. The new bonds were priced a solid 210bp inside its older 8.5% bonds due February 2023 that are currently yielding 12.07%, indicating a strong greenium on the new bonds.

SGX raised $250mn via a 5Y bond at a yield of T+40bp, 30bp inside the initial guidance of T+70bp area. The bonds have expected ratings of Aa2 by Moody’s and received strong orders of over $2.8bn, 11.2x issue size. Proceeds will be used to fund SGX’s investments, debt refinancing and general corporate needs.

Taizhou Urban Construction and Investment Development Group raised $500mn via a 3Y bond at a yield of 2.05%, 30bp inside the initial guidance of 2.35% area. The bonds have expected ratings of  BBB and received orders over $1.85bn, 3.7x issue size. Proceeds will be used to refinance debt, fund project construction and development and supplement working capital. There is a put option at 101 if a change of control covenant is triggered. The issuer is a strategic funding vehicle for the Taizhou municipal government.

Zhuhai Huafa Group raised $200mn via a 3.5Y bond at a yield of 2.95%, 40bp inside the initial guidance of 3.35% area. The bonds have expected ratings of  BBB and received orders over $2bn, 10x issue size. Proceeds will be used for offshore debt refinancing and offshore business operation. The bonds will be issued by Huafa 2021 I Co with a guarantee from Zhuhai Huafa. Zhuhai Huafa is owned by Zhuhai municipality in southern China and is the largest government-related entity and primary urban developer in the city. It deals in urban operation, financial services and property development.

Huainan Construction Development Holdings raised $200mn via a 3Y credit enhanced bond at a yield of 2.8%, inline with the initial guidance. The bonds are unrated. Proceeds will be used for the construction of urban sewage pipeline network upgrade projects within the Huainan municipality and to replenish working capital. The bonds are backed by an irrevocable standby letter of credit by Huishang Bank Corp.

Lionbridge Capital raised $150mn via a 364-day notes at a yield of 5.8%, inline with the initial guidance. The unrated bonds will be issued by wholly owned subsidiary New Lion Bridge and guaranteed by Lionbridge. The notes will also have a keepwell deed support from CCB Trust, a 67%-owned subsidiary of China Construction Bank. Proceeds will be used for debt refinancing, general corporate and working capital purposes.

Japan Finance Organization for Municipalities (JFM) raised €1bn via a 10Y bond at a yield of MS+18bp, 2bp inside the initial guidance of MS+20bp area. The bonds have expected ratings of  A1/A+ and received orders over $1.85bn, 1.9x issue size.

New Bonds Pipeline

  • Adani Green Energy $ 144A/Reg S senior secured green bond

 

Rating Changes

Term of the Day: 

Jackson Hole

Jackson Hole, Wyoming is the location of The Federal Reserve Bank of Kansas City’s annual monetary policy symposium, one of the most important events attended by central bankers and economists across the globe. The conference will be held virtually for the second year running, after the Fed announced in July that the in-person event will be cancelled, the clearest sign yet of the impact of the Delta variant on the Fed’s plans.

The symposium has an interesting history with the venue being shifted to Jackson Hole in 1982 to entice then Fed Chair Paul Volcker to attend. Volcker was an avid fly fisherman and Jackson Hole has world class trout fishing.

 

Talking Heads

On Fed taper likely to be faster than expected – Greg Jensen, co-chief investment officer of Bridgewater Associates

“The economy is going to pull the Fed.” “There’s certainly inflation well above their target and we think it will continue to accelerate if the Fed doesn’t move.” “The biggest arbitrage you can take in the world right now is take what the policy makers are giving you,” Jensen said. “They’re giving you incredibly low interest rates relative to high nominal GDP growth.”

 

Esther George, Kansas City Fed Chair
“When you look at the job gains we saw last month, the month before, you look at the level of inflation right now, I think it would suggest that the level of accommodation we’re providing right now is probably not needed in this scenario.” “So I would be ready to talk about taper sooner rather than later.”
Robert Kaplan, Dallas Fed Chair
“We are seeing some distortions and excesses that need to get normalized,” Kaplan said. “I think at the Fed we have to take that very seriously,” Kaplan said.
Steve Bullard, St. Louis Federal Reserve President
“I think that there is worry that we’re doing more damage than helping with the asset purchases because there is an incipient housing bubble in the U.S. The median house price, at least the number I saw, was approaching $400,000,” said Bullard. “We got into a lot of trouble in the mid-2000s by being too complacent about housing prices, so I think we want to be very careful on that this time around.”

 

“Ever since the Fed and the Treasury and the world’s central banks rescued the global economy,” and the Fed injected trillions of dollars into markets, investors have became “forced buyers,” Marks said. “The whole world is in this low return environment and the question is how do you behave in a low-return environment and the answer is that there’s no easy answer,” he said. “Distressed debt investing takes advantage of the difficulties that some companies have in financing their operations in tough times, and the fact that in tough times other people become too worried and decline to make financing available”, he said.

 

“Asking the central bank to say you should buy only green bonds, not brown bonds, etc., is asking the central bank to impose its own views on something which is primarily a fiscal matter,” he said.

 

Top Gainers & Losers – 27-Aug-21*

BondEvalue Gainer Losers 27 Aug (1)

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