US equities advanced as S&P was 0.6% higher and Nasdaq over 1% higher. Utilities led the gains, up 1.4% followed by real estate up 1.2%. Financials and energy sectors fell 0.6% and 1.3% respectively. US 10Y Treasury yields eased by 4bp. European equities were 0.2-0.3% lower. US IG CDS spreads were 1.1bp tighter and HY was 0.9bp tighter. EU main CDS spreads were 0.2bp wider and crossover spreads widened 2.1bp. Asian equity markets have opened positive with gains of 0.4% and Asia ex-Japan CDS spreads are tighter by 1.3bp. Asian primary markets are seeing a busy day with five new dollar deals this morning.
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New Bond Issues
- Petronas US$600m 7Y at T+125bp area; books over $1bn
- Clifford Capital $ 5Y government guaranteed at T+30/35bp
- Hutchison Port Holdings Trust $ 5Y at T+155bp area; books over $1bn
- Beijing Public Housing Center $ 5Y at 2.5%
- Japfa Comfeed $ 5NC3 SLB at 5.875% area; boks over $400mn
Barclays raised €1bn ($1.2bn) via a 10Y non-call 5Y tier 2 bond (10NC5) at a yield of 1.206%, or Mid-Swaps + 155bp, 30bp inside initial guidance of MS+185bp area. The bonds have expected ratings of Baa3/BB+/BBB+ and received orders over €3.5bn ($4.2bn), 3.5x issue size. Proceeds will be used for general corporate purposes and to strengthen the capital base of the issuer and its subsidiaries and/or its Group.
Bank of America (BofA) raised €1.5bn ($1.8bn) via a 10Y non-call 9Y bond (10NC9) at a yield of 0.694%, or Mid-Swaps + 75bp, 25bp inside initial guidance of MS+100bp area. The bonds have expected ratings of Baa3/BB+/BBB+ and received orders over €3bn ($3.6bn), 2x issue size. If not called, the coupon refixes quarterly at 3m EURIBOR +79bp.
Fujian Yango Group raised $175mn via a 3Y non-put 2Y (3NP2) bond at a yield of 12%. The bonds have expected ratings of B- and investors have a put option at par after two years on March 19, 2023. Proceeds will be used for debt refinancing and general corporate purposes. Yango (Cayman) Investment is the issuer and Fujian Yango Group is the parent guarantor.
Jiangsu Fang Yang Group raised $150mn via a 3Y bond at a yield of 5.3%. The senior unsecured bonds have expected ratings of BB, in-line with the guarantor. The bonds are guaranteed by Jiangsu Fang Yang and Haichuan International Investment is the issuer. Proceeds will be used for offshore debt repayment. Jiangsu Fang Yang Group is a Chinese local government financing vehicle (LGFV) and Fang Yang Group is the sole investment and financing arm of the Lianyungang municipal government to develop Lianyungang Xuwei New District, an SEZ in Jiangsu province.
GLP China Holdings raised $66mn via a tap of their Shanghai Pilot Free Trade Zone 2.6% bond due 2024 at a yield of 2.6%. The bonds are unrated and the total amount outstanding is now at $126mn. GLP China is 66.21%-owned by Singapore-based GLP.
New Bond Pipeline
- Laos $ 5Y bond
- Shuifa Group $ 3Y green bond
- Krung Thai Bank $ AT1
- Merck $10.5bn offering
- Clean Renewable Power/Hero Future Energies $ Green Yankee
- Sumitomo Mitsui Trust Bank $ bond
- Delhi International Airport $ bond
- Meinian Onehealth Healthcare $ bond
- JSW Steel $ bond
Rating Changes
- Fitch Upgrades Axtel to ‘BB’; Revises Outlook to Stable
- Zurich Insurance Co. Ltd. Core Subsidiaries Upgraded To ‘AA’ From ‘AA-‘; By S&P Outlook Stable
- Telecom Argentina S.A. Assigned Stable Outlook By S&P And Off CreditWatch On Amendment To Foreign Exchange Controls
- Cleveland-Cliffs Inc. Outlook Revised To Positive By S&P On Strong Expected Cash Flow; ‘B-‘ Rating Affirmed
- Western Midstream Operating L.P. Outlook Revised To Stable From Negative By S&P; Ratings Affirmed
- Fitch Revises Outlook on Hanwha Life to Stable; Affirms at IFS ‘A’
- Moody’s affirms ratings of Jefferies (Baa3 senior debt) and its subsidiaries and changes outlook to positive
- Kirk Beauty ‘CCC+’ Rating Placed On CreditWatch Positive By S&P On Proposed Refinancing; New Debt Assigned Preliminary Ratings
- Fitch Places InfraBuild on Rating Watch Negative
- Indian Railway Finance Corp.’s Proposed US$ Notes Rating Discontinued By S&P
- National Bank of Kuwait S.A.K. ‘A-1’ Commercial Paper Program Rating Withdrawn By S&P At The Issuer’s Request
Term of the Day
Yankee Bond
These are a type of Eurobond issued and traded in the US and are denominated in USD. In essence, if a foreign company (a non-US based company) issues a USD bond which is traded in the US, the bond is considered a Yankee Bond. This is in comparison to a Eurodollar bond that is issued by a foreign entity denominated in USD, but the bonds are issued and trade outside of the US. India’s Hero Clean Energy recently hired bankers for a green Yankee bond.
Talking Heads
On the advice not to overinterpret ECB”s weekly bond buying numbers – Isabel Schnabel, European Central Bank board member
“An extrapolation from weekly data to overall monthly data may lead to misleading conclusions about our monthly purchase behaviour,” Schnabel added. “Do not read too much into weekly purchase data under the PEPP.”
In a note by Giles Gale, NatWest Markets strategist and team
“The bottom line for markets is now simple –- to be short is to oppose the ECB.” “That’s not something to take lightly.”
On benchmark US bond yields slipping from 13-month highs as Fed meeting approaches
David Joy, chief market strategist at Ameriprise Financial
“I think there is still a bias toward accelerating economic growth,” said Joy.
According to ANZ economists
“Following the fiscal stimulus packages it is inevitable that Fed GDP forecasts will be revised up, and some FOMC members might think rates will have to move higher sooner than they anticipated last December.”
On time to buy stuff amid ‘stupid’ bond economics – Ray Dalio, founder of Bridgewater Associates
“The economics of investing in bonds (and most financial assets) has become stupid,” he said. “Rather than get paid less than inflation why not instead buy stuff— any stuff — that will equal inflation or better?” “I also believe that assets in the mature developed reserve currency countries will underperform the Asian (including Chinese) emerging countries’ markets,” he wrote, adding that Chinese bond holdings by international investors are rising fast.
On China’s property market abuzz as authorities walk tightrope to recall illegal loans
Larry Hu, economist at Macquarie Capital
“The property sector is the single most important driver of the Chinese economy, and arguably the biggest risk as well,” said Hu. “[So] the central bank is facing major challenges this year, including the cooling down of the housing market without a crash.”
Joanna Davies, analyst at Fathom Consulting
“[But] the danger in this approach is that it merely reinforces the implicit guarantee [on housing prices] which has helped foster much of this risky behaviour in the first place,” Davies said. “All the while, China’s housing bubble is at increasing risk of bursting.”
On US airline chiefs expressing optimism after busy spring travel weekend
Scott Kirby, United Airlines chief executive
“I do think we’re near the end of the virtual world,” Kirby said.
Rochelle Walensky, director of the US Centers for Disease Control and Prevention
“[Friday] is the most travellers that we’ve had in a single day since last March, before the WHO [World Health Organization] declared the global pandemic. We have seen footage of people enjoying spring break festivities maskless. This is all in the context of still 50,000 cases per day.”
Top Gainers & Losers – 16-Mar-21*
