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US Treasury yields were stable on Monday. Markets await the US CPI and Core CPI prints for October later today, expected at 3.3% and 4.1% YoY respectively. This compares to 3.7% and 4.1% seen in September. Separately, Moody’s revised the outlook on the US to negative from stable, whilst affirming its Aaa rating. Moody’s noted that the “downside risks to the US’ fiscal strength have increased”. US credit markets saw IG CDS spreads tightening by 0.8bp while HY spreads tightened by 2.1bp. S&P rose and Nasdaq fell 0.1-0.2%.
European equity markets closed higher. In credit markets, European main CDS spreads were tighter by 2.1bp and crossover spreads tightened by 6.7bp. Asian equity markets have opened weaker today and Asia ex-Japan IG CDS spreads were flat.
We are excited to share that our company has raised a $6mn in Series B funding. The round saw new investor Beacon VC, the corporate venture arm of Thailand’s Kasikornbank, join existing shareholders MassMutual Ventures and Citigroup who also participated in the round. Click on the banner below for details.
Brazil raised $2bn via a long 7Y sustainability bond at a yield of 6.5%, 30bp inside initial guidance of 6.8% area. The senior unsecured bonds have expected ratings of Ba2/BB-/BB. Proceeds will be used for the repayment of outstanding external federal public debt and to finance/refinance eligible green and/or social projects applicable under Brazil’s Sovereign Sustainable Bond Framework. The new bonds offer a new issue premium of 11bp over its existing 3.75% 2031s that yield 6.39%.
A tender offer is an offer made by an issuer to bondholders to buyback their bonds. In return, the bondholders could get either cash or new bonds of equivalent value at a specified price. The issuer does this to retire some of its old debt and can use retained earnings to fund the purchases without affecting the liquidity position of the company. Tender offers have a deadline date before which holders must tender their bonds back.
On Buying Junk Bonds Being the Top Contrarian Trade for 2024
Matt Brill, head of North America IG credit at Invesco
“There’s actually been outflows for high yield, but the universe has shrunk more at the same time. If you can get inflows which should happen as the Fed pauses and yields stabilize — combined with a shrinking universe, it’s a very good combination”
Geof Marshall, PM at CI Global Asset Management
“We’re getting a big flashing green light on yield and price in the high-yield market. Defaults in the next downturn might peak at 4%…. we’re coming into it with better quality now in the high-yield bond market than ever”
On Seeing Far Deeper Fed Rate Cuts Than What Markets Are Pricing – UBS Strategists
“We don’t see the conditions for why this time is so different… Every single central bank bar Japan will be easing by a lot more than what markets are pricing… In a cycle that is very aggressive in coming down 275bp, we see the 10-year only coming down around 100bp”
On South African Bonds Giving Some of the Best Returns in EMs
Conrad Wood, head of fixed income at Aluwani Capital
“National Treasury is set to pro-actively explore alternative funding sources to cover their budget deficit, steering away from solely relying on the local bond market, as they have done in the past”
Erik Nel, CIO at Terebinth Capital
“The inflation premium on offer meant investors were being offered bonds at attractive valuations”
On Lira Bonds Will Be Top Investment in 2024 – Deutsche Bank
“It is still a few months too early to turn structurally bullish… believe local bonds need to reprice another 200-400 basis points, but then offer value from a structural perspective…. High inflation means that ongoing nominal depreciation of the exchange rate is inevitable, but we expect the path to be more gradual next year”