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US Treasury yields edged further lower across the curve, as Middle East geopolitical tensions continue to weigh on markets. As per reports, Israeli missiles have hit a site in Iran, days after the latter launched a retaliatory drone strike on Israel. New York Fed President John Williams said that while it is “not” his baseline expectation to hike rates, it is possible if warranted. Atlanta Fed President Raphael Bostic said that he does not think it will be appropriate to ease until towards end-2024. Separately, Minneapolis Fed President Neel Kashkari said that the Fed may “potentially” hold rates steady all year. US IG CDS spreads tightened 0.4bp and HY spreads were 2bp tighter. The S&P and Nasdaq fell by 0.2% and 0.5% respectively.
European equity indices ended higher. European IG CDS spreads tightened 1.8bp while crossover spreads were 6bp wider. Asian equity markets have opened in the red today. Asia ex-Japan IG CDS spreads were 1.2bp tighter. Japan’s inflation data came in at 2.7% for March, just below the 2.8% consensus forecast.
Puma Energy raised $500mn via a 5NC2 bond at a yield of 7.75%, ~25bp inside initial guidance of low-8%s area. The bonds are rated Ba3/BB (Moody’s/Fitch). The issuer is Puma International Financing and Puma Energy Holdings Pte Ltd is the guarantor. The bonds have a change of control put at 101. Proceeds will be used to repurchase certain validly tendered existing 2026s and accepted in connection with its tender offer.
Goldman Sachs raised $5bn via a two-trancher. It raised $2.5bn via a 6NC5 bond at a yield of 5.727%, 25bp inside initial guidance of T+130bp area. It also raised $2.5bn via a 11NC10 bond at a yield of 5.851%, 28bp inside initial guidance of T+150bp area. The senior unsecured notes are rated A2/BBB+/A. Proceeds will be used for general corporate purposes. The new 6NC5s were priced at a new issue premium of 16.7bp over its existing 2.6% 2030s (callable in 2029).
Carnival raised €500mn via a long 5Y bond at a yield of 5.75%, ~37.5bp inside initial guidance of 6-6.25% area. The senior unsecured notes are rated B3/BB-. The bonds have a change of control put at 101. Proceeds will be used together with cash on hand to redeem its EUR 7.625% 2026s in full.
LG Electronics raised $800mn via a two-tranche issuance. It raised $500mn via a 3Y bond at a yield of 5.772%, 40bp inside initial guidance of T+135bp area. It raised $300mn via a debut 5Y sustainability bond at a yield of 5.782%, 40bp inside initial guidance of T+150bp area. The senior unsecured bonds are rated Baa2/BBB. Proceeds from the new 3Y notes will be used for general operations, including operating- and investment-related activities, and refinancing maturing debt and other obligations. Proceeds from the 5Y sustainability notes will be used to finance or refinance, in whole/in part, new or existing eligible green projects and social projects in accordance with its sustainable finance framework.
Earnouts are a contractual provision during a merger or acquisition, providing for contingent additional payments from the buyer of a company to the seller’s shareholders. Essentially, earnouts state that the seller of a business would receive compensation in the future if the merged/acquired business achieves certain financial goals. Earnouts help bridge the differing views that both parties may have regarding the M&A agreement on an upfront cash price or valuation for example.
On Vanguard Warning 10Y Treasury Yields Risking Jump Back to 5%
Ales Koutny, head of international rates at Vanguard
“We are in a danger zone right now…. critical 4.75% level… still think that there’s a residual long position left over. If that doesn’t manage to be orderly squared away, that disorderly move could be what takes us eventually to 5%”
On Some Hedge Funds Too Big to Fail for Bond Market – IMF
“Some of these (highly leveraged) funds may have become systemically important to the Treasury and repo markets, and stresses they face could affect the broader financial system”
On Alarm Over US Debt Jolt to Markets – Goldman President, John Waldron
“The thing that I worry about is the confluence of a political crisis and a lot of leverage in the Treasury system. The more leverage we have, the riskier we make it… wish Washington would get its spending under control… Think about the LDI situation that happened in the UK”