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Bond Market News
Credit Spreads at Multi-Decade Lows; Air-France-KLM Prices Bond
August 29, 2025
The US Treasury curve flattened with short-end yields higher by 1bp while long-end yields eased by 2bp. The second reading of US Q2 GDP showed a 3.3% pick-up, higher than expectations of 3.1%. Separately, initial jobless claims for the previous week rose by 229k, better than expectations of 230k. Fed governor Christopher Waller said that the Fed should be “cutting the policy rate now”. He said that inflation was close to 2% with market-based measures of long-term inflation expectations being firmly anchored. Also, he said that the chances of a weakening in the labor market have increased. However, while he does not see the need for an outsized rate cut in September, he anticipates additional cuts over the next 3-6 months.
Looking at US equity markets, the S&P and Nasdaq ended 0.3% and 0.5% higher respectively. US IG CDS spreads were 0.3bp tighter and HY spreads tightened by 3.4bp. European equity markets ended mixed. The iTraxx Main and Crossover CDS spreads tightened by 0.4bp and 11.8bp respectively. Asian equity markets have opened mixed today. Asia ex-Japan CDS spreads were 0.9bp tighter.
Global credit spreads, measured by Bloomberg Global Aggregate Corporate OAS Index are currently at multi-decade lows, as seen in the chart above. Analysts note that there is a change in fundamentals, with companies in a position to comfortably pay interest and meet debt maturities. Besides, they also noted technical factors driving the spread compression. Click here to read more.
New Bond Issues
Air France-KLM raised €500mn via a 5Y bond at a yield of 3.866%, 35bp inside initial guidance of MS+190bp area. The senior unsecured note is rated BB+/BBB- (S&P/Fitch). Proceeds will be used for general corporate purposes.
New Bond Pipeline
- Arab National Bank $ PerpNC5.5Y AT1 Sustainability Sukuk
Rating Changes
- Moody’s Ratings upgrades Coinbase (Ba2 backed senior unsecured) with stable outlook
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Moody’s Ratings affirms Janus Henderson’s Baa2 issuer rating; outlook changed to positive
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Echostar Corp. Ratings Placed On CreditWatch Positive On Proposed Sale Of Spectrum Assets
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AT&T Inc. Outlook Revised To Stable From Positive On Proposed $23vb Spectrum Purchase From Echostar
- Fitch Places AT&T on Negative Rating Watch Following Spectrum Acquisition; IDR ‘BBB+’
Term of the Day: Credit Spread
Credit Spread simply put, refers to the difference in yield or return between two debt instruments with same maturity but different credit quality (rating). An example: If the 10Y US Treasury has a yield of 1% and a 10Y USD corporate bond has a yield of 2.5%, the corporate bond is said to have a credit spread of 1.5% or 150 basis points. Credit spreads are indicative of the economic health of the bond issuer and are subject to change. While “wide” credit spreads indicate concerns over the ability of the borrower re-pay the scheduled interest and principal amount on time, “narrow” or “tight” credit spreads indicate strong economic fundamentals.
Talking Heads
“Debt levels are incredibly high — they are ever-increasing… While in the past, you might have said, ‘So what? Markets will take it,’ that’s not the case any more, even in advanced economies… Bond markets are in a fragile place, you have valuations in equity markets that are sky high”
On Undermining Fed Independence Creates Big Risks – ECB Governing Council member Olli Rehn
“Ever since double-digit inflation was tamed in the 1980s, the Fed’s independence has been seen as an inviolable principle — now this principle is being undermined… Uncertainty about the effects of geopolitics and the trade war nevertheless clouds the economic outlook”
On Citigroup Talking about Boosting Bets Against Long Bonds on Risks to Fed
“Fears of a weakening of the Fed’s independence has two main market release valves in our view: weaker USD and steeper curve”
Top Gainers and Losers- 29-Aug-25*
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