US equity markets ended slightly higher on Wednesday with the S&P and Nasdaq up 0.4% each. Sectoral gains were led by Utilities, up 1% and Information Technology, up 0.9% while Energy was down 1.7%. US 10Y Treasury yields were 8bp up at 2.91% on Fed minutes indicating a firm stance on further rate hikes (scroll down to the Talking Heads section). European markets were also higher with the DAX, CAC, and FTSE up 1.6%, 2% and 1.2%. Brazil’s Bovespa gained 0.4%. In the Middle East, UAE’s ADX fell 0.2% while Saudi TASI gained 0.6%. Asian markets have opened mixed – Shanghai, STI and Nikkei were up 0.5%, 0.2% and 0.7% respectively while HSI was down 0.5%. US IG CDS spreads tightened 0.7bp and US HY spreads were tighter by 6.1bp. EU Main CDS spreads were 2.5bp tighter and Crossover spreads were tighter by 10.2bp. Asia ex-Japan IG CDS spreads widened 2.3bp.
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New Bond Issues
- SocGen S$ PerpNC5.5 AT1 at 8.5% area
- LG Chem $ 3Y green at T+165bp area
- SPDB London $ 3Y green at T+80bp area
New Bonds Pipeline
- Korea Housing Finance Corp hires for € 4Y Social Covered bond
- Busan Bank hires for $ Social bond
- Continuum Energy Aura hires for $ Green Bond
- EnergyAustralia Downgraded To ‘BBB-‘ On Weak Operating Conditions; Outlook Negative
- Fitch Downgrades Crown Resorts to ‘BB-‘; Maintains RWN; Withdraws Rating
Term of the Day
“Participants concurred … that the near-term inflation outlook had deteriorated since the time of the May meeting… many participants judged that a significant risk … was that elevated inflation could become entrenched if the public began to question the resolve of the Committee to adjust the stance of policy as warranted”
“The outlook since our last update in April has darkened significantly… We are in very choppy waters… The risk has gone up so we cannot rule it [recession] out.”
Seth Meyer, fixed income portfolio manager at Janus Henderson.
“Economic growth may slow or go into reverse, but companies are starting from a very profitable position… A preference for using debt as a larger part of the finance mix means just one in six U.S. companies has net cash on its balance sheet, compared to almost one in three elsewhere in the world… Companies will weather the downturn and use cash flow to reduce borrowings further”
Fed Chairman. Jerome Powell on June 15
The index of common inflation expectations at the board has moved up after being pretty flat for a long time, so we’re watching that, and we’re thinking, ‘This is something we need to take seriously
Robert Dent, Nomura Securities senior US economist
“We are looking for the index to come in at a record”…it is being driven up by increases in expectations among households and forecasters