This site uses cookies to provide you with a great user experience. By using BondbloX, you accept our use of cookies.
S&P ended flat on Friday while Nasdaq was 0.8% higher. The US 10Y Treasury yield was 2bp lower. Financials underperformed the index as the Fed confirmed it would not extend the Supplementary Leverage Ratio (Term of the Day, explained below) beyond the March 31, 2021 deadline set last year. Meanwhile, European equities fell with the DAX down 1%, CAC and FTSE down ~1.1%. US IG CDS spreads were 0.4bp tighter and HY was 4.3bp tighter. EU main CDS spreads were 0.2bp tighter and crossover spreads widened 1.2bp. Asian equity markets have opened slightly higher, up 0.3% and Asia ex-Japan CDS spreads are tighter 0.1bp.
Keen to learn bond market fundamentals from industry professionals? Sign up for our Bond Traders’ Masterclass that consists of five modules starting on March 24. Avail a 25% discount on a bundle of five sessions!
The modules are specially curated for private bond investors and wealth managers to develop a strong fundamental and practical understanding of bonds. Given the ultra-low interest rate environment, flurry of new bond deals particularly from junk-rated issuers and tightening credit spreads, it is now more important than ever for investors to understand bond valuation, portfolio construction and new bond issues to help them get better return for risk. The sessions will be conducted by debt capital market bankers who have previously worked at premier global banks such as Credit Suisse, Citi and Standard Chartered.
NMG Holding Co Inc/Neiman Marcus Group raised $1.1bn via a 5Y non-call 2Y (5NC2) bond at a yield of 7.125%, inside initial guidance of mid-high 7%s. The bonds have expected ratings of Caa2/CCC+. Proceeds from the senior secured first lien bonds will be used to payback its $125mn first-in, last-out (FILO) facility and ~$748mn exit term loan and bonds due 2025 that will result in a “modest reduction” in interest as per an S&P report. The deal was upsized from $1bn to $1.1bn.
AT&T raised $6bn via a three-part offering. It raised:
Asian junk rated sovereign Laos yet again pulled its dollar bond offering, the third time in over three months, citing unfavorable market conditions. The initial guidance of the planned issue was at 11%.
Moody’s changes Mong Duong Finance’s outlook to positive; affirms Ba3 senior secured rating
Fitch Affirms Hudbay’s IDR at ‘B+’; Outlook Revised to Positive
Moody’s downgrades Banco Nacional de Panama’s ratings; changes Outlook to stable
US primary market issuances dropped to $33.5bn, down 46% vs. $62bn the week prior. The fall in issuance can be attributed mainly to IG at $20.4bn, down 57% WoW while HY was at $12.7bn, down 15% WoW. The largest deals in the IG space were led by AT&T’s $6bn three-trancher, followed by Charles Schwab’s $2.25bn issue. In the HY space, T-Mobile’s three-part issuance amounting to $3.8bn led the table, followed by Neiman Marcus’ 7.125% 5NC2 issue. In North America, there were a total of 78 upgrades and 37 downgrades combined, across the three major rating agencies last week. LatAm saw just $178mn of deals last week vs. $1.1bn in the week prior with Unifin Financiera leading with a $128mn issuance. EU Corporate G3 issuance saw an increase last week to $32.3bn vs. $24bn priced in the week prior – Nordea Hypotec’s €3bn ($3.6bn) was the largest single deal followed by Traton Finance’s €1.25bn ($1.5bn) and Santander’s €1bn ($1.2bn). GCC and Sukuk G3 issues were at a meagre $55mn vs. $520mn in the week prior with Emirates NBD raising $40mn overall. APAC ex-Japan G3 issuances stayed relatively higher at $7.7bn vs $5.4bn in the prior week. FMG Resources’ $1.5bn led the table followed by CCB International’s $800mn, Krung Thai Bank’s debut $600mn AT1, Petronas’ $600mn, Clifford Capital’s $500mn and Cliffton/DIAL’s $450mn orphan SPV structure issues. In the Asia ex-Japan region, there were 18 upgrades and 6 downgrades combined, across the three major rating agencies last week.
The Supplementary leverage ratio (SLR) is a ratio used in the US to calculate the amount of tier 1 capital banks must hold relative to their total leverage exposure. Large US banks must hold capital of at least 3% of their assets and Global Systemically Important Banks (G-SIBs) must hold an extra 2% buffer, totaling 5%. In April 2020, the Fed loosened the SLR requirement to exclude holdings of Treasuries and reserves maintained with the Fed while calculating the ratio – this reduces the denominator (by increasing banks’ ability to take more deposits) and thereby allows more capital to be employed for lending purposes. FT reports that JPMorgan had the lowest SLR among US banks at 6.9% as at 2020 end vs. 5.8% without the concession. To learn more about the SLR, click here.
“Looking through near-term volatility introduced by energy prices and other volatile price components, we see inflation remaining low in the near-term, with central bank inflation targets elusive over the next 18 months or so. The global economy has spare capacity to accommodate rising demand. If the spending were to be increased steadily over years, however, this would likely end up in higher inflationary pressures.”
Judge grants definitive suspension to AMLO’s electrical reform