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US Treasury yields rose sharply on Thursday up 10-13bp across the curve following a weak 30Y auction and Jerome Powell’s speech. The US Treasury’s $24bn auction of 30Y notes tailed by over 5.5bp with at a high yield of 4.769% and a bid-to-cover ratio of 2.24x, down from 2.35x in the October sale, and the three month average of 2.41x. Fed Chairman Jerome Powell made a hawkish remark saying, “if it becomes appropriate to tighten policy further, we will not hesitate to do so”, adding that the FOMC was not confident of having achieved their inflation stance”. US credit markets saw IG CDS spreads widening by 1.1bp while HY spreads tightened by 20bp. S&P rose and Nasdaq fell 0.8-0.9%.
European equity markets closed mixed. In credit markets, European main CDS spreads were tighter by 0.2bp and crossover spreads tightened by 2.2bp. Asian equity markets have opened lower today and Asia ex-Japan IG CDS spreads tightened by 3.4bp.
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.
Bank of China Sydney raised $300mn via a 3Y FRN at a yield of 5.956%, 45bp inside initial guidance of SOFR+105bp area. The senior unsecured bonds have expected ratings of A1/A. Proceeds will be used to finance/refinance sustainability-linked loans outlined in BOC’s sustainability-linked loan funding (“SLLF”) framework. The new bonds offer a new issue premium of 24.6bp over its existing 2% 2025s that yield 5.71%.
Intesa Sanpaolo raised €1.75bn via a 2Y FRN at a yield of 4.773%, 20bp inside initial guidance of 3m Euribor+100bp area. The senior preferred bonds have expected ratings of Baa1/BBB/BBB, and received orders over €2.3bn, 1.3x issue size. Proceeds will be used for general corporate purposes The new bonds are priced 8.7bp tighter to its existing 3.928% 2026s that yield 4.86%.
Bonds whose size is fixed and cannot be increased are called ‘Will Not Grow (WNG)’ or ‘No Grow’ bonds. Sometimes, issuers increase the final size of a deal to accommodate investor appetite. WNG bonds however have a fixed size and will not be increased. For example, green bonds often fall into this category as per the Climate Bonds Initiative (CBI). The CBI says that issuers need to show that there are enough green projects to match the amount that they intend to raise and for some, the number of suitable projects is limited. This according to them shows why green bonds tend to be smaller than vanilla bonds from the same issuer whereas for others there is more flexibility and the final size of the deal can be increased to accommodate investor appetite.
On UBS Seeing AT1 Market Confidence Return After $36bn Demand – UBS CEO Sergio Ermotti
“People are slowly but surely recognizing that that event in March was an idiosyncratic event… People understand that the AT1s are a very important element of our capital stack. We are accommodating a big demand for hybrid fixed income, but at the same time it’s very beneficial for our shareholders.”
On remaining to be seen if more tightening is needed – Richmond Fed President Thomas Barkin
“I do anticipate some sort of a slowdown, as I just have to believe the net impact of all this tightening will eventually hit the economy harder than it has… With rates restrictive and financial conditions tightened, we have time to reconcile competing narratives on demand and to test different views on the trajectory of inflation”
On Investment bankers see dealmaking lull storing pent-up demand
Goldman Sachs global M&A co-head, Stephan Feldgoise
“CEOs and corporate boards do not need to have a very clear picture of what the future will look like, but they need a degree of stability. I’m reasonably bullish that this will return, but obviously it will be in fits and starts”
BofA Chairman of global M&A, Steven Baronoff
“You can see why some companies are saying, if I don’t have to do this deal now, maybe it is more prudent to wait”
JPMorgan Chase global M&A head, Anu Aiyengar
“Our (deal pipelines) are at one of the largest levels that you’ve seen in five-six years. Some (companies) will come out and take the lead”