Tencent, Times, CCB Launch Bonds; Macro; Rating Changes; Talking Heads; Top Gainers & Losers

S&P and Nasdaq slipped 0.4% and 1% respectively after moving higher intra-day as the earnings season is underway with banking majors Goldman, JP Morgan and Wells Fargo reporting strong numbers. US 10Y Treasury yields were 1bp higher. Meanwhile in Europe, DAX was down 02% while CAC and FTSE were up 0.4% and 0.7% respectively. US IG CDS spreads were 0.1bp tighter and HY was 0.4bp tighter. EU main CDS spreads were 0.4bp tighter and crossover spreads tightened 2.8bp. Asian equity markets are down 0.5% and Asia ex-Japan CDS spreads were a massive 9bp wider.

 

New Bond Issues

• Tencent $ 10Y/20Y/30Y/40Y at T+165bp/175bp/185bp/195bp areas
• Times China capped $200mn 363-day notes at 5.3%
• CCB HK branch 3Y/5Y $ sustainability-linked bond at T+90bp/T+100bp area

Guotai Junan Securities raised $500mn via a 5Y bond at a yield of 2.005%, 45bp inside initial guidance of T+160bp area. The bonds have expected ratings of Baa1 and received orders over $2.1bn, 4.2x issue size. Guotai Junan Holdings is the issuer and Guotai Junan Securities is the guarantor. Proceeds will be used to refinance debt and for the general corporate purposes of the guarantor.

Shinhan Bank raised $mn via a 5.5Y sustainability bond at a yield of 1.514%, 25bp inside initial guidance of T+90bp area. The bonds have expected ratings of Aa3/A+/A, x issue size. Proceeds will be used to fund or refinance green and social projects under the bank’s sustainable development goals bond framework.

 

New Bond Pipeline

• China Water Affairs Group $ green bond

• BOC Aviation $ bond

• Putian State-owned Asset Management $ bond
• IRFC $ 5Y bond

 

Rating Changes

• Cimpress PLC Upgraded To ‘BB-‘ By S&P On Expectations For Improved Credit Metrics Over The Next 12 Months; Outlook Stable
• Fitch Upgrades SM Energy’s IDR to ‘B’; Outlook is Stable
• Moody’s downgrades Yestar’s ratings to Caa1; outlook remains negative
• Fitch Downgrades Tianjin Rail Transit to ‘BBB+’; Outlook Stable
• Fitch Downgrades Eldorado’s Ratings to ‘B-‘; Rating Watch Negative
• Dell Technologies Inc. ‘BB+’ Ratings Placed On CreditWach Positive By S&P On Planned Debt Reduction
• Fitch Places Dell Technologies’ Ratings on Watch Positive on VMware Spin-Off Announcement
• Levi Strauss & Co. Outlook Revised To Stable From Negative By S&P On Improving Revenue Expectations, Ratings Affirmed
• FedEx Corp. Outlook Revised To Stable From Negative By S&P On Improving Credit Measures; ‘BBB’ Rating Affirmed
• Fitch Places China Huarong Financial Leasing on RWN
• The Commercial Bank Of Qatar Outlook Revised To Positive By S&P On Advancing De-Risking Strategy; ‘BBB+/A-2’ Ratings Affirmed
• Fitch Places VMware’s Ratings on Rating Watch Positive on Dell Spin-off Announcement
• Moody’s reviews Huarong Financial Leasing’s ratings for downgrade
• Moody’s reviews China Zheshang Bank for upgrade
• Moody’s withdraws CapitaLand Commercial Trust’s ratings

Z-Spread, also known as Zero-volatility spread is a fixed spread over the Treasury spot curve that makes the present value of the bond equal to its price. The Z-spread indicates the extra compensation or spread for credit, liquidity and optionality risk that investors would receive for buying that bond. The idea of calculating the spread is that a coupon paying bond can be valued as a series of zero-coupon bonds and the present value of these should be equal to the price of the bond. A simple approximate formula to understand Z-spread better is:

Treasury Yield + Z-Spread of the Bond ≈ Yield of the Bond

A widening z-spread indicates increased risk in the bond and a tightening z-spread indicates reducing risk. Huarong’s z-spreads have widened massively over the fortnight on reports of restructuring.

 

Talking Heads

On the People’s Bank of China’s intentions to maintain just enough medium-term liquidity even as it contains rising leverage