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US Treasury yields eased slightly yesterday by 1-2bp. Primary markets continued to showcase a strong start to the new year with another flurry of new issuances yesterday. On the data front, the US ISM Manufacturing Index edged up 0.7 points to 47.4 last month, albeit extending the longest stretch of contracting activity since 2000-01, following the dot-com bubble induced recession. As part of its components, the Prices Paid Index decreased by 4.7 points to 45.2, helped by a drop in oil prices to a near six-month low in December. Also, the FOMC minutes were released yesterday, citing lower inflation risks whilst also mentioning concerns about overly restrictive policy. US credit markets saw IG CDS spreads widen by 2bp and HY spreads widen by 12bp. US equity markets ended lower again, with the S&P falling 0.8% and Nasdaq falling 1.2%.
European equity markets closed lower too. Credit markets in the region saw the European main CDS spreads widen by 3.2bp and crossover spreads widen by 18bp. European banks continued their foray in the primary markets to issue debt, that included the likes of UBS, Barclays, Credit Agricole and BNP Paribas (scroll lower for details on the pricing of the new issuances). Asian equity markets have followed global bourses, having opened weaker again today. Asia ex-Japan IG CDS spreads widened by 3.8bp. The APAC dollar bond primary markets also kicked-off with deals from Indonesia, NAB and Hyundai Capital.
Indonesia raised $2.05bn via a three-tranche issuance. It raised:
The SEC registered notes are rated Baa2/BBB/BBB. Proceeds will be used for general government purposes.
NAB raised $3.25bn via a four-part deal. Details are given in the table below:
The senior notes are rated Aa3/AA-. Proceeds will be used for general corporate purposes.
BBVA Mexico raised $900mn via a 15NC10 Tier 2 bond at a yield of 8.125%, 12.5bp inside initial guidance of 8.25% area. The subordinated notes have expected ratings of Baa3/BB. Proceeds will be used to strengthen its capital ratios and for general corporate purposes. If not called on 8 Jan 2034, its coupon resets to the 5Y UST + 421.4bp. The new bonds were priced at a new issue premium of 31.5bp over its existing 8.45% Tier 2 notes due 2038 that yield 7.81%.
Hyundai Capital raised $2.5bn via a four-part issuance. Details are given in the table below:
The senior unsecured bonds are rated Baa1/BBB+. Proceeds will be used for general corporate purposes.
Barclays raised €1bn via a 9NC8 bond at a yield of 4.505%, 20bp inside initial guidance of MS+225bp area. The senior unsecured bonds are rated Baa1/BBB+/A. Proceeds will be used for general corporate purposes of the issuer and its subsidiaries and/or the group and may be used to further strengthen their capital base.
Credit Agricole raised €2.5bn via a two-tranche issuance. It raised $1bn via a 6NC5 bond at a yield of 5.335%, 25bp inside initial guidance of T+170bp area. It also raised $1.5bn via a 11NC10 Tier 2 bond at a yield of 6.251%, 30bp inside initial guidance of T+265bp area. The senior non-preferred bonds are rated A3/A-/A+ while the subordinated Tier 2 bonds are rated Baa1/BBB+/A-. The new Tier 2s were priced 47bp over its existing 4% Tier 2s due January 2033, that yield 5.78%
BNP Paribas raised €750mn via an 8NC7 bond at a yield of 4.042%, ~12.5bp inside initial guidance of MS+170/175bp area. The senior non-preferred notes are rated Baa1/A-/A+, and received orders over €1.35bn, 1.8x issue size.
UBS raised €1.25bn via a 9.5NC8.5 bond at a yield of 4.203%, 30bp inside initial guidance of MS+205bp area. The senior unsecured bonds are rated A3/A-/A, and received orders of over €3.4bn, 2.7x issue size. Proceeds will be used for general corporate purposes. The new bonds were priced ~13bp wider to its existing 4.75% bonds due March 2032 that yield 4.07%.
Allianz raised €1bn via a 30.5NC10.5 Tier 2 bond at a yield of 4.851%, 20bp inside initial guidance of MS+255bp area. The senior unsecured bonds are rated A1/A+, and received orders of over €2.4bn, 2.4x issue size. Proceeds will be used for general corporate purposes including financing a tender offer for an outstanding €1.5bn 3.875% Perp. The new bonds were priced at a new issue premium of 28bp over its existing subordinated 5.824% bonds due July 2053s, callable in 2033, that yield 4.57%.
SK Hynix hires for $ 3Y/5Y bond
As the name suggests, these are bonds registered with the US Securities and Exchange Commission (SEC). These are not to be confused with 144A bonds, which are privately placed, not SEC registered and have lesser documentation and are traded among Qualified Institutional Buyers (QIBs). Given 144As are restricted securities, they have resale and transfer restrictions that are not applicable for SEC-registered securities. Besides these, they also have a few other differences like being eligible for inclusion in bond indices like Barclays Aggregate Bond Index, no investment restrictions and no private placement restrictions on communications.
On UK Debt Facing Wall of Supply Hit Harder in Global Bond Downturn
Imogen Bachra, head of UK rates strategy at NatWest Markets
“A long-end syndication and a long BOE QT auction makes for quite a heavy schedule this month. It’s partly a wake up call”
On European Stocks Face Risks After Bullish Run – Citi’s Manthey
“Equity market volatility tends to rise when central bank easing begins and markets positioning is now the most bullish since 2019, implying potential near-term vulnerabilities… We would buy dips, as advised by our Bear Market Checklist, while not chasing rallies”
On soft landing for economy ‘increasingly conceivable’ – Richmond Fed President Thomas Barkin
Fed is “making real progress” towards taming inflation without inflicting major damage on the job market, with a hoped-for soft landing “increasingly conceivable”… potential for additional rate hikes remains on the table.