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US Treasury yields inched higher across the curve on Friday. US Industrial Production advanced 0.1% after a downwardly revised 0.5% drop a month earlier. While manufacturing output jumped 0.8% last month, it followed a downwardly revised 1.1% decrease in January. Credit markets saw US IG CDS spreads widen 0.6bp and HY spreads widen by 3.5bp. Looking at equity indices, S&P and Nasdaq fell 0.7-0.9%.
European equity indices closed lower too. European IG CDS spreads widened 1bp and HY spreads were 6bp wider. Asian equity markets have opened mixed today. Asia ex-Japan IG CDS spreads were 1.7bp wider. All eyes are now on the BOJ where market participants expect the central bank to hike rates and end the negative rate regime. This particularly comes after the country’s largest union group said that the nation’s largest companies have agreed to a 5.28% wage increase in 2024, the highest in 33 years.
Shuifa Group raised $180mn via a 3Y green bond at a yield of 7.2%, 20bp inside initial guidance of 7.4% area. The senior unsecured notes are rated Baa2. Proceeds will be used for refinancing its existing debts and replenishing the working capital in accordance with the Green Bond Framework. CICC is the green adviser to the issuer’s notes. The bonds have a change of control put at 101.
BBVA raised €1bn via a 7Y green senior-preferred bond at a yield of 3.61%, 30bp inside initial guidance of T+120bp area. The notes are rated A3/A/A-, and received orders of €2.75bn, 2.75x issue size. They have a clean-up call upon 75% of the notes being retired. Proceeds will be used to finance projects as as per BBVA’s Sustainable Debt Financing Framework.
A clean-up call refers to a call provision, whereby once a stated percentage of a security is retired, the issuer is obliged to call the remainder of the tranche. While clean-up calls are generally more commonly observed in mortgage-backed securities (MBS), they may also be present as a feature in some bonds. This is different from a normal call option in a bond where the issuer has an option to redeem their bond fully during the specified call date./period.
On Frontier Markets Win Over Bond Investors With ‘Radical Shift’
Charlie Robertson, head of macro strategy at FIM Partners
“Frontier in recent years has offered the horrible combination of negative real rates and overvalued currencies… Now we have cheap currencies and in some cases, the highest real interest rates in the world”
Peter Marber, chief investment officer for EM at Aperture Investors
“There are definitely opportunities in frontier markets”
Ziad Daoud, Bloomberg’s chief EM Officer
“These countries need to remove capital restrictions, remove the multiplicity of exchange rates, and provide positive real interest rates to attract international investments”
On Wall Street Doom Prophesy Falling Flat
Vincent Deluard, director of global macro strategy at StoneX
“The markets take the best from the AI story, the best from the disinflation story, the best from the growth story and project that forever”
Scott Rubner, a MD at Goldman Sachs
“The return of the YOLO was not on my February bingo card… I need to wake up every morning to see what stock can rally 50% by Friday”
On Goldman Expecting BOJ Scrapping Negative Interest Rates
“BOJ probably no longer needs more data for the policy change, nor to wait to justify the policy change with the quarterly Economic Outlook report”
US probing Adani Group and founder over potential bribery – Bloomberg