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US Treasury yields dropped across the curve led by the 2Y and 5Y that fell 10-11bp. The manufacturing sector continued to show signs of contraction with the Dallas Fed Manufacturing Activity at -17.2 vs expectations of -19.0. CME probabilities for a 25bp hike in November continued to stay at 49% from 38% a week ago. US IG credit spreads were tighter by 1.2bp while HY CDS spreads tightened 7.1bp. The S&P and Nasdaq were higher by 0.6% and 0.8% respectively.
European equity markets were higher too. In credit markets, European CDS markets were closed on account of the summer bank holiday in the UK. Asian equity markets have opened higher again this morning and Asia ex-Japan CDS spreads have tightened by 0.8bp.
Shandong Marine raised $200mn via a 3Y bond at a yield of 7.25%, 25bp inside initial guidance of 7.5% area. The senior unsecured bonds are unrated. Proceeds will be used to refinance its outstanding 4.8% notes that mature on 28 September 2023, which are currently trading at 100.174 to yield 2.51%.
Black Peony HK raised $126mn via a 3Y bond at a yield of 6.95%, 35bp inside initial guidance of 7.3% area. The senior unsecured bonds are unrated. Proceeds will be used to refinance existing debt.
On Emerging-Market Rally Runs Into Doubts Over China and Fed
Vishnu Varathan, ED and head of economics and strategy at Mizuho Bank
“The Chinese market may still look like falling knives for those requiring somewhat more comfort on policy commitment. Add to that a Fed that is a little more restrained on uncertainty, but necessarily a long way off a proper pivot”
“Volatility seems to be the main determinant of illiquidity in the market… when fiscal uncertainty or a debt ceiling debate or a Covid crisis or monetary policy uncertainty start to get volatility higher and higher, the market becomes less and less liquid, it’s an extremely regular relationship. About 80% of illiquidity is explained simply by variation in yield volatility.”
On Vanguard joins BlackRock, cuts support for shareholder items on climate, social issues
“In some cases, we identified that although a proposal raised a material risk at the company in question, the board had already demonstrated appropriate oversight of the risk and evidenced its oversight through robust disclosure or had practices in place that substantially fulfilled the proposal’s request”
On Yen to Retreat to 1990 Levels If BOJ Stays Dovish – Goldman Sachs
“As long as the BOJ remains far from hiking rates and equities stay reasonably well supported, the yen should continue to trend weaker… main risk to this forecast of more yen weakness over the next six months is that higher inflation and currency depreciation proves more unpopular and catalyses more forceful responses”