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US Treasury yields were stable across the curve on Monday. US Factory Orders fell 3.6% in October after a downwardly revised 2.3% in September, the biggest monthly drop since April 2020. Analysts note that this was not only the biggest monthly drop in roughly 3.5 years, but also possibly indicates weakening demand for durable goods and transportation equipment. US credit markets saw IG CDS spreads widen 0.9bp and HY widening 4bp. Equity markets ended lower on Monday, with the S&P and Nasdaq down 0.5% and 0.8% respectively.
European equity markets were lower too. In credit markets, European main CDS spreads were wider by 1bp and crossover spreads widened by 3.8bp. Asian equity markets have opened weaker today. Asia ex-Japan IG CDS spreads were tighter by 0.1bp.
Wells Fargo raised $2.75bn via a two-tranche deal. It raised $2.25bn via a 3Y bond at a yield of 5.254%, 20bp inside initial guidance of T+105bp area. It also raised $500mn via a 3Y FRN bond at a yield of 6.46%. The floating coupon will reset at the overnight SOFR plus a spread of 107bp and will be paid quarterly. The senior unsecured bonds have expected ratings of Aa2/A+/AA-. Proceeds will be used for general corporate purposes.
General Motors raised $3bn via a two-part deal. It raised $1.5bn via a 5Y bond at a yield of 5.817%, 25bp inside initial guidance of T+185bp area. It also raised $1.5bn via a 10Y bond at a yield of 6.12%, 25bp inside initial guidance of T+210bp area. The senior unsecured bonds have expected ratings of Baa2/BBB/BBB. Proceeds will be used for general corporate purposes. Both bonds have a make-whole call.
Deutsche Lufthansa AG Upgraded To ‘BBB-/A-3’ On Strong Yields And Robust Air Travel Demand; Outlook Stable
Fitch Upgrades Holly Energy Partners to ‘BBB-‘ from ‘BB+’ and Withdraws Rating
Pitney Bowes Inc. Downgraded To ‘B+’ From ‘BB-‘ On Continued Losses In Global Ecommerce Business; Outlook Stable
Moody’s downgrades 3M’s senior unsecured ratings to A3; outlook negative
Rising stars are companies that have recently seen credit rating upgrades that pull its rating to investment grade category from its previous junk or high yield category. They are termed as rising stars as their financial and/or operational metrics show an improving trend. The opposite of rising stars are fallen angels, which are issuers that have been recently downgraded to junk category from its previous investment grade rating category.
On Favors Options to Counter ‘Excessive’ Rate-Cut Pricing – Goldman Sachs
“Markets are approaching the limits of what can plausibly be priced without attaching material odds of a recession in the near term… Both the magnitude and front-loading of easing currently priced are likely excessive”
On Stocks Are Imperiled as a Slowdown Is Set to Hit Earnings – JPMorgan
Dubravko Lakos-Bujas, JPMorgan chief global equity strategist
“The market is pricing in effectively some sort of soft landing and many are calling for ‘Goldilocks,’ which is sort of the best of both worlds: Not too hot, not too cold. That’s unrealistic… Almost everybody is bullish. So I don’t know. Maybe we’re the lone crazy people”
On Underlying US inflation pressures easing in October – NY Fed
Underlying inflation pressures eased in October compared to the prior month. Multivariate Core Trend (MCT) inflation reading for October stood at 2.6% vs. September’s 2.88%. The higher MCT relative to its pre-pandemic average “is in large part due to the sector-specific trends in housing and services ex-housing
On looking past the pain for a China bull market as green shoots emerge
Hayden Briscoe, head of APAC multi-asset portfolio management at UBS Hong Kong
“This is a great entry point to get invested into the Chinese market. China is going to have a much nicer recovery. Basically, a bull market… We have gone overweight already”
Terrence Gray, a money manager and analyst at Lazard
“For the past few years, we were pretty significantly underweight. We have been adding to it. It’s one of the markets that we see as very attractive. People are starting to look at it a little more closely and that will continue to drive the market.”