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Risk-on sentiment took over global markets with the S&P and Nasdaq ending 1.5% and 2.1% higher. Sectoral gains were led by Communication Services, Real Estate, IT and Materials, up over 2% each. US 10Y Treasury yields eased 2bp to 1.92%. European markets also rallied with the DAX, CAC and FTSE 1.6%, 1.5% and 1% each. Brazil’s Bovespa closed 0.2% higher. In the Middle East, UAE’s ADX was up 0.7% and Saudi TASI closed 0.2% lower. Asian markets have opened with a negative bias – HSI, Shanghai and STI are down 0.44%, 0.10% and 0.06%, while Nikkei is up 0.07%. US IG CDS spreads were 1.2bp tighter and HY CDS spreads were 10bp tighter. EU Main CDS spreads were 1.5bp tighter and Crossover CDS spreads were 5.9bp tighter. Asia ex-Japan CDS spreads were 2.6bp tighter.
Citic Limited $ 5Y at T+165bp
Starbucks raised $1.5bn via a two-tranche deal. It raised:
CDB HK Branch raised $550mn via a 5Y bond at a yield of 2.125%, 42bp inside the initial guidance of T+75bp. The bonds have expected ratings of A1/A+?A+ (Moody’s/S&P/Fitch). Proceeds will be used for working capital and general corporate purposes.
ING Groep raised €3bn via a two-tranche deal. It raised:
Kookmin Bank raised $700mn via a two-tranche sustainability deal. It raised:
Japan Bank for International Cooperation (JBIC) raised $1.25bn via a 7Y bond at a yield of 2.157%, 1bp inside the initial guidance of SOFR MS+46bp. The bonds have expected ratings of A1/A+, and received orders over $2bn, 1.6x issue size.
Distressed Debt Exchange (DDE) is an offer made by a company to its bondholders to avoid bankruptcy, improve liquidity, reduce debt, manage its maturity dates (by exchanging debt securities that are coming due for debt securities with an extended maturity) and to reduce or eliminate onerous covenants. Fitch has several criteria for an offer to be called as a DDE which can be seen here.
On Fitch Citing Bitcoin Risk as It Cuts El Salvador Deeper into Junk
“The weakening of institutions and concentration of power in the presidency have increased policy unpredictability, and the adoption of Bitcoin as legal tender has added uncertainty about the potential for an IMF program that would unlock financing for 2022-2023″.
On Banks Lifting Credit Spread Forecasts as Rate Hikes Rattle Bonds
Goldman Sachs’ strategists led by Lotfi Karoui
“We expect an additional build-up in risk premium, more so than we had initially envisioned in early January, especially in the euro market, where the policy shock has been the largest”
ABN Amro strategists led by Shanawaz Bhimji
“The ECB has clearly added more uncertainty to an already frail market for credit”
On Wall Street Facing Fresh Pain When Key Bond Distortion Fades Out
Jason Pride, chief investment officer for private wealth at The Glenmede Trust Co
“The term premium has been negative for a long time and we need to get back to a natural structure… Investors need to know that if you lend for longer periods off time, they will be compensated.”
David Kelly, chief global strategist at JPMorgan Asset Management
“Failure to push long term rates higher will only mean the Fed is complicit in encouraging the misallocation of capital in the U.S. and global economies. A higher risk premium is important for long-term financial stability.”
Tobias Adrian, chief financial economist and director of IMF’s monetary and capital markets department
While the Fed’s QT will raise term premium, on net, we still might be looking at a pretty negative level going forward”
Kelly Chen, an assistant vice-president and analyst at Moody’s
“Bond market access will remain difficult for the sector as bond price volatility remains high and investors’ and lenders’ risk appetite stays low, and thus, it will increase refinancing risk for financially weak developers in particular.”
Beike Research Institute (BRI), a research arm of KE Holdings, China’s biggest online property broker
“The credit environment has not fully improved, but we see positive signals from the central government are helping to ease the headwinds affecting the sector.”
Leonard Law, credit analyst at Lucror Analytics
“January used to be when there were heavy offshore bond issuances. Given the sector’s troubles, it remains very difficult for property developers to issue offshore bonds, unless the issuer is a state-owned firm or a handful of strong private companies.”
“This [higher yields] is likely to remain the case for the next two to three quarters, unless we see more concrete government support for the sector in terms of boosting contracted sales and the developers’ access to financing.”