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US Treasury yields shifted higher by 6-8bp yesterday after economic data indicated some signs of strength. Initial jobless claims in the US dropped by 18k to 20k, below estimates of 216k. US ADP private payrolls increased 164k last month, the most since August. Whilst seen as a pre-cursor to the NFP print due later today, in recent times, the correlation between the two has weakened. NFP is expected at 175k with Average Hourly Earnings (AHE) YoY at 3.9%. US credit markets saw IG CDS spreads tighten by 0.4bp while HY spreads stayed flat. US equity markets ended lower for a third straight day, with the S&P and Nasdaq falling 0.3% and 0.6% respectively.
European equity markets closed higher. Credit markets in the region saw the European main CDS spreads tighten by 1.4bp and crossover spreads tighten by 3.2bp. On Europe’s front, the contraction in business activity continued at the end of 2023 due to persistent weakness in the services industry. The HCOB’s Composite PMI was revised up for December to match November’s 47.6 after a preliminary estimate of 47.0. However, it remained below the 50-mark, indicating contraction for a seventh month. The Services PMI was marginally higher at 48.8 from November’s 48.7. Asian equity markets have opened with a slightly weaker tilt today. Asia ex-Japan IG CDS spreads widened by 5.3bp.
Standard Chartered raised $1.5bn via a 11NC10 bond at a yield of 6.097%, 25bp inside initial guidance of T+235bp area. The senior unsecured notes are rated A3/BBB+/A. Proceeds will be used for general corporate purposes.
BP Capital Markets raised $2.25bn via a two-trancher. It raised $1.25bn via a long 5Y bond at a yield of 4.699%, 22bp inside initial guidance of T+95bp area. It also raised $1bn via a long 10Y bond at a yield of 4.989%, 15bp inside initial guidance of T+115bp area. The senior unsecured bonds are rated A2/A-/A+. Proceeds will be used for general corporate purposes, including working capital for BP or other companies in the BP Group and the repayment of existing borrowings. The new 10Y bonds were priced at a new issue premium of 20bp over its existing 4.893% bond due September 2033 that yields 4.75%.
KEXIM raised $2bn via a three-tranche deal. It raised:
The senior unsecured notes are rated Aa2/AA/AA-. Net proceeds from the sale of the 5Y and 10Y notes will be used for general purposes, including extending foreign currency loans and repayment of maturing debt and other obligations. The net proceeds from the sale of the 3Y notes will be used to finance/refinance, in whole or in part, new or existing projects or assets related to (i) renewable energy, (ii) energy efficiency, (iii) clean transportation, (iv) pollution prevention and control, (v) sustainable marine transportation, and (vi) sustainable water and wastewater management.
Jinan Zhangqiu Holding raised $118.8mn via a 330-day bond at a yield of 5.907%, 29.3bp inside initial guidance of 6.2%. The notes are unrated. The issuer is Golden Dragon Mountain Trading BVI Co Ltd and Jinan Zhanggiu is the guarantor. Net proceeds will be used for refinancing existing offshore debt. The bonds have a change of control put at 100.
NatWest Markets raised €2.5bn via a two-part deal. It raised €1.75bn via a 2Y FRN at 3m Euribor+60bp area, 30bp inside initial guidance of 3m Euribor+90bp area. It also raised €1.75bn via a 5Y bond at a yield of 3.704%, 25bp inside initial guidance of MS+145bp area. The senior unsecured notes are rated A1/A/A+, and received orders of over €4.2bn, 1.7x issue size.
Banco Sabadell raised €750mn via a 6NC5 bond at a yield of 4.122%, 25bp inside initial guidance of MS+185bp area. The senior preferred notes are rated BBB/BBB, and received orders of over €2.5bn, 3.3x issue size.
SK Hynix hires for $ 3Y/5Y bond
An importer bond is the most common type of Customs bond. This type of bond allows an importer of merchandise to bring their goods into the United States. The bond guarantees that the entry paperwork is filed correctly by the principal or principal’s customs broker and the appropriate amount of duties, taxes and fees will be paid by the principal to Customs. An importer bond can be issued as a continuous bond, or as a single entry bond.
Recently Argentina issued Importer bonds called as “Bopreal” which stands for “bonds for the reconstruction of a free Argentina” offering a 5% annual interest rate, to help importers pay down their debt to suppliers abroad.
On Morgan Stanley Dropping Contrarian Bet for Dollar to Rally in 2024
“Our conviction about dollar strength has waned meaningfully. US data deceleration has compressed growth differentials, US rates have fallen further compared with peers, and investors appear far from defensive based on equity returns”
On Credit’s $240bn Wipeout Making Late-2023 Rally a Memory
Shanawaz Bhimji, head of corporate bond research at ABN Amro Bank
“Just before year-end, we thought that this is really moving fast now. The market was priced for perfection… no incentive to get back in. When you have an asset that is fairly valued or a bit overvalued, investors get a bit nervous.”
Kshitij Sinha, PM at Canada Life Asset Management
“The strong rally in yields and spreads has meant issuers want to take advantage of conditions. Supply will keep pressure on spreads.”
On AlphaSimplex Exiting Short Bet Against US Bonds After ‘Epic’ Shift
“Trend signals have finally turned long… an epic signal for the market because we have been short for nine quarters… signals the end of the tightening cycle and it suggests we are going through a regime change ”