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New Bond Issues
China Ping An Insurance Overseas (Holdings) $ 10Y at T+210bp area
Kasikornbank $ PerpNC5.5 AT1 at 4.25% area
Mapletree Investments S$ PerpNC3 fixed-for-life at 4% area
Bank of China (HK Branch) $ 3Y FRN at SOFR+80bp area, GBP 2Y FRN at SONIA+75bp area
Barclays raised €1.5bn ($1.8bn) via an 8Y non-call 7Y (8NC7) bond at a yield of 0.577%, ~22.5bp inside initial guidance of Mid-Swaps+105/110bp area. The bonds have expected ratings of Baa2/BBB/A, and received orders over €3.3bn. The coupons are fixed at 0.577% until the first call date of August 9, 2028 and if not called, resets to the 1Y EUR MS+85bp. Proceeds will be used for general corporate purposes, and may be used to strengthen further the capital base of the Issuer and its subsidiaries and/or the Group.
Credit Suisse raised $3.75bn via a three-part offering. It raised:
- $1.4bn via a 2Y bond at a yield of 0.52%, 12.5bp inside initial guidance of T+45/60bp area
- $600mn via a 2Y floating rate note (FRN) at a yield of 0.43%, 38bp over SOFR vs. initial guidance of SOFR Equivalent
- $1.75bn via a 5Y bond at a yield of 1.297%, 15bp inside initial guidance of T+80bp area
The SEC registered bonds have expected ratings of A1/A+. Proceeds will be used for general corporate purposes. The 5Y bond was priced ~16bp inside its 4.55% bonds due April 2026 (rated A-), that yield 1.46%.
Yunnan Communications Investment and Construction Group raised $200mn via a 3Y bond at a yield of 3.1%, 50bp inside initial guidance of 3.6% area. The bonds are unrated. Wholly-owned subsidiary YCIC International (HK) is the issuer and guaranteed by Yunnan Communications Investment and Construction Group. Proceeds will be used for general corporate purposes.
Korea Midland Power raised $300mn via a 5Y bond at a yield of 1.306%, 35bp inside initial guidance of T+100bp area. The bonds have expected ratings of Aa2/AA, and received orders over $2.7bn, 9x issue size. Asia took 89% of the bonds and the rest went to EMEA. Asset/fund managers bought 60%, banks 28%, central banks, sovereigns, supranationals and agencies and pension funds 11% and private banks 1%. Proceeds will be used for general corporate purposes, but not for activities related to the construction of new coal-fired generation units.
New Bonds Pipeline
- HDFC Bank hires for $ AT1
Ningbo Yincheng Group hires for $ bonds; calls today
Nanjing Jiangbei New Area Industrial Investment Group hires for $ bonds; calls today
- Fitch Upgrades Cenovus Energy to ‘BBB-‘; Outlook Revised to Stable
- Southwestern Energy Co.’s Proposed Senior Unsecured Notes Due 2029 Rated ‘BB-‘ (Recovery: ‘3’) By S&P; On CreditWatch Positive
- CPI Property Group Rating Affirmed At ‘BBB’ By S&P And Removed From CreditWatch; Outlook Negative
- Moody’s downgrades Evergrande’s and its subsidiaries’ ratings; changes outlook to negative
July 2021: 52% of Dollar Bonds Traded Higher with IG Outperforming
The month of July saw a continuation of June’s move with 52% of dollar bonds in our universe delivering a positive price return ex-coupon during the month compared to 54% in the prior month. But, unlike June where both Investment Grade (IG) and High Yield (HY) bonds traded in tandem (53% and 55% of IG & HY moved higher in June), July saw IG outperform with 64% of dollar bonds in the green. HY in comparison had a rather gloomy month with 64% of dollar bonds in the red.
The drag in the HY space was dominated by China real estate developers, led by China Evergrande’s dollar bonds that dropped over 50% and peers like Rongxinda, RiseSun, R&F Properties, Fantasia, Yuzhou also dropping sharply in the month.
For the box & whisker chart of investment grade bonds, issuance volumes, largest deals, top gainers and losers for July, click the button below:
Term of the Day
Risk Weighted Assets
Risk Weighted Assets (RWA) is a calculation used in banking that helps determine the minimum amount of capital (capital adequacy ratio) that a bank should keep as reserves against unexpected losses arising out of its assets turning sour or insolvency/bankruptcy. Riskier assets like unsecured loans, high yield securities etc. that carry a higher risk of default are given a higher risk weightage and safer assets like Treasuries are given a lower weightage since high risk assets require higher capital adequacy ratios (CAR).The minimum capital requirements as a percentage of RWAs are set by regulatory agencies with banks required to keep a minimum of 10.5% of RWA as Tier 1 and Tier 2 capital under Basel III.
“We don’t believe that this is where we will end the year and we do anticipate that interest rates will rise.” “Heading into December 2021 we’ll see a compression of this labour market slack that have we witnessed over the past several months as kids go back to school and employment subsidies subside.”
Top Gainers & Losers – 03-Aug-21*