US Treasury yields continued to tick slightly higher yesterday by 3-5bp with markets awaiting the CPI print today. The 2Y yield is now back above the 4%-mark since going below the level at end-March. The peak fed funds was unchanged at 5%. US CPI YoY is expected to come at 5.1% and Core CPI is expected at 5.6%. The probability of a 25bp rate hike in the May meeting stayed almost unchanged at 70% as per the CME’s maximum probabilities. US IG and HY CDS spreads tightened 1.6bp and 7.9bp respectively. US equity indices continued to stay rangebound as the S&P ended flat and Nasdaq ended 0.4% lower. The IMF trimmed its global growth forecasts for the year taking into account the banking failures of SVB and Signature Bank, and the forced sale of Credit Suisse. Its real GDP forecast is now for a 2.8% expansion in 2023 and 3% in 2024, revised downwards by 0.1% since January. This comes after the global economy grew 3.4% in 2022.

European equity markets ended higher by ~0.5%. European main CDS spreads tightened by 3.3bp and Crossover spreads were 13.8bp tighter. Asia ex-Japan CDS spreads tightened by 5.6bp. Asian equity markets have broadly opened in the green this morning.

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New Bond Issues

  •  Shangrao Investment $ 3Y Sustainability Bond

New Bond Issues 12 Apr 23

Banco do Brasil raised $750mn via a 7Y Sustainability bond at a yield of 6.625%, 25bp inside initial guidance of 6.875% area. The bonds have expected ratings of Ba2/BB-. The bank intends to allocate an amount equal to the net proceeds of the notes for the financing and/or refinancing of existing or future environmental and social projects that meet the eligibility criteria described in the preliminary pricing supplement. The bank intends to initially focus on projects that involve (i) renewable energy finance, and (ii) micro, small and mid-size enterprise financing and microfinance, particularly for the empowerment and socioeconomic advancement of women-led enterprises.

MUFG raised $2.5bn in a 4-tranche deal. It raised:

  • $500mn via a 3NC2 bond at a yield of 5.541%, 35bp inside initial guidance of T+185bp area. The new bonds are priced 3.1bp wider to its existing 3.837% 3NC2s that yield 5.51%.
  • $300mn via a 3NC2 FRN bond at a yield of 6.279% vs. initial guidance of SOFR+144bp area.
  • $700mn via a 6NC5 bond at a yield of 5.242%, 30bp inside initial guidance of T+200bp area.
  • $1bn via a 11NC10 bond at a yield of 5.406%, 28bp inside initial guidance of T+225bp area. The bonds have expected ratings of A1/A-/A-.

The bank intends to use the proceeds raised to fund its operations through loans that are intended to qualify as internal TLAC debt.


New Bonds Pipeline

  • Kookmin Bank hires for $ 3Y and/or 5Y bond


Rating Changes

  • Guatemala Long-Term Foreign Currency Rating Raised To ‘BB’ On Economic Resilience; Outlook Stable

Term of the Day

Base Effects

Base effect refers to the impact of comparing current levels of an index for a given period vs. levels during the same period a year/quarter/month ago. Let’s take an example of inflation. Analysts look at the inflation print for a given month and compare it with the same month in the previous year to find out the YoY change. If the rate of inflation was low/high in the previous year’s corresponding period, even a small increase/decrease in the price index will result in a larger/smaller rate of inflation in the current year.

For example, let’s assume the inflation index values are at 100 in December 2020, at 110 in December 2021 and 120 in December 2022. While the inflation index has risen by 10 points in both years, the percentage rise in inflation over the previous year is 10% for 2021 and 9.09% for 2022. This is due to the higher base of 110 in 2021 leading to a lower inflation in 2022.


Talking Heads

On Inflation Data Shattering Stock Market Calm, Goldman Partner John Flood Warns

“Stock market wants a softer print as a hot reading will add more confusion/uncertainty into the equation of what the Fed does from here. Another hike in May but then aggressive cuts in Q4? This is what Fed fund futures are pricing in ahead of tomorrow’s print.”

Dennis DeBusschere, founder of 22V Research

“Investors are waiting for a pullback and think macro data will provide it soon, a theme that has not played out YTD”

On Being Prepared to Do More If Needed to Curb Inflation – Philadelphia Fed President Patrick Harker 

“Since the full impact of monetary policy actions can take as much as 18 months to work its way through the economy, we will continue to look closely at available data to determine what, if any, additional actions we may need to take. But make no mistake: We are fully committed to bringing inflation back down to our 2% target… If we see inflation not budging, then I think we’ll have to take more action. But at this point, I don’t see why we would just continue to go up, up, up and then go, whoops! And then go down, down, down very quickly. Let’s sit there”

On China Supporting Sri Lanka’s Debt Rework – Sri Lanka Central Bank Governor, Weerasinghe

“It’s in the best interest for China and Sri Lanka both to complete this process soon and we can get back to repaying our distressed obligation… we have to make sure that we do it as soon as possible… There is a better understanding of the public in Sri Lanka on the need for these reforms and the continuation of these reforms so that we can get out of this crisis”

On IMF & NY Fed’s Williams Differing on Rate Rise’s Role in Bank Failures

IMF Financial Counsellor, Tobias Adrian

“As interest rates are being raised, vulnerabilities are appearing. We have seen that in March in the banking sector in the US and Switzerland.”

Federal Reserve New York President, John Williams

“I personally don’t think it was the case that the pace of rate increases was really behind the issues at the two banks back in March. I think it’s well understood there were some pretty idiosyncratic specific issues with those institutions”


Top Gainers & Losers –12-April-23*


BondEvalue Gainer Losers 12 Apr 23

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