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US Treasury yields jumped further higher, led by the front-end, as strength in economic data saw markets reprice their view on expected Fed rate cuts. The 2Y yield rose by 12bp and the 10Y was up 3bp. US Retail Sales rose by more than expected in December, thanks to an increase in motor vehicles and online purchases. Retail sales increased 0.6% MoM vs. estimates of 0.4% and the previous 0.3% print. Core retail sales rose 0.4%, above estimates and the prior 0.2%. On a YoY basis, it rose 5.6% vs. estimates of %. The control group sales, used to calculate GDP, advanced 0.8%, the most since July, above estimates of 0.2% and prior month’s 0.4%. Also, US Industrial Production and Manufacturing Output rose 0.1% in December. Following this, markets have priced-out 15bp in rate cuts as seen by the Fed Funds Futures. Prior to the data release, markets were pricing 155bp in rate cuts for 2024. After the resilient data, markets are now pricing 140bp in rate cuts. US IG CDS spreads widened 1.4bp and HY spreads widened 4.2bp. Equity markets saw the S&P and Nasdaq fall 0.6%
European equity markets ended lower. Credit markets in the region saw the European main CDS spreads widen by 1.4bp and crossover spreads widen by 7.3bp. Asian equity markets have opened weaker again today. Asia ex-Japan IG CDS spreads widened by 4.1bp.
Woori Bank raised $700mn via a two-tranche deal. It raised $300mn via a 3Y bond at a yield of 4.884%, 35bp inside initial guidance of T+110bp. It also raised $400mn via a 5Y bond at a yield of 4.875%, 35bp inside initial guidance of T+120bp. The senior unsecured bonds are rated A1/A+. Proceeds will be used to finance and/or refinance, in whole or in part, new or existing projects from any of the eligible categories in accordance with the issuer’s sustainability financing framework. The new 3Y note was priced in-line with its existing 2% 2027s that currently yield 4.87%.
Republic of Chile raised $1.7bn via a 5Y bond at a yield of 4.872%, 35bp inside initial guidance of T+120bp area. The senior unsecured bonds are rated A2/A/A-. Proceeds will be used in projects that qualify as “eligible social expenditures” under Chile’s Sustainable Bond Framework.
ABC New York Branch raised $600mn via a 3Y FRN at a yield of 5.109%, 27bp inside initial guidance of SOFR+110bp area. The senior unsecured notes are rated A- (S&P). Proceeds will be used for general corporate purposes.
Golden Power refers to the special power of the Italian government to limit or stop foreign direct investments (FDI) and corporate transactions that involve Italian strategic assets. This provision was introduced in 2012 and now applies to sectors like defense, infrastructure networks, critical infrastructures and technologies, the iron and steel industry, agri-food, 5G, fintech/insurtech and smart contracts.
On many in China feeling the economy is in recession
Zhu Tian, economics professor at China Europe International Business School in Shanghai
“We’re in a recession. If you talk to 10 people, seven will say we’ve had a bad year… I don’t think the government can afford that. This cannot go on forever”
Yuen Yuen Ang, Alfred Chandler Chair of Political Economy at Johns Hopkins University.
“The big risk is that the fallout from diminishing old growth sources could become too large to contain and inhibit new growth sources. If that happens, China could become stuck in transition”
On Debt Crisis Is Top Risk for Africa – Standard Bank Chair, Nonkululeko Nyembezi
“People went and got low-interest loans by the bucketload. We now have to contend, country by country, with how to support countries… People will come in with funds, with capital, but they want to know that it’s being deployed in the right way”
On Liquidity Risks Are Worrying IMF Amid High Debt – IMF’s deputy MD, Gita Gopinath
“This year, we are more worried about liquidity problems. Many countries borrowed a lot during the pandemic. That was short term in nature, and that’s coming due, so I think liquidity risks are something we should pay attention to… Debt is at extremely high levels”