This site uses cookies to provide you with a great user experience. By using BondbloX, you accept our use of cookies.
Bond Market News
DIB, YPF, Braskem Price $ Bonds; Treasury Yields Rise 6-7bp
October 10, 2024
US Treasury yields rose by about 6-7bp across the curve yesterday. The 10Y and 30Y yields reached their highest levels since late-July, now sitting at 4.07% and 4.34% respectively. There was rather mixed demand for the US 10Y Treasury auction yesterday, with a strong indirect acceptance at 77.6%, but a relatively weaker bid-to-cover ratio of 2.48x (vs. 2.64x last month). In addition to this, the FOMC meeting minutes were released. Fed Chairman Jerome Powell described the 50bp rate cut to be a recalibration aimed at ensuring that the labor market remained strong. However, there were some officials who felt that a more gradual pace of rate cuts were warranted due to the prevailing resilience observed in the economy. Powell has also reiterated that the FOMC is not in a hurry to cut rates quickly. According to the Implied Fed Funds Futures Rate, traders are starting to price in only less than 50bp of cuts by end-2024. US IG and HY CDS spreads tightened by 0.6bp and 1.3bp respectively. Looking at US equity markets, S&P and Nasdaq both closed higher by 0.7% and 0.6% respectively.
European equities followed suit and closed higher too. In terms of Europe’s CDS spreads, the iTraxx Main and Crossover spreads tightened by 0.7bp and 4.3bp respectively. Asian equities opened mixed as of this morning. Asia ex-Japan CDS spreads tightened by 0.2bp.
New Bond Issues
Dubai Islamic Bank (DIB) raised $500mn via a PerpNC6 sukuk at a yield of 5.25%, 50bp inside initial guidance of 5.75% area. The subordinated notes are unrated and issued by DIB Tier 1 Sukuk 6 Ltd. If not called by 2030, the coupons will reset to the 6Y US Treasury yield plus a spread of 133.4bp. The notes have a dividend stopper. Upon the occurrence of a non-viability event, a write-down in full or in part as the regulator may require shall occur.
Braskem raised $850mn via a 10Y bond at a yield of 8%, inside initial guidance of mid-8% area. The senior unsecured notes are rated BB+/BB+. Proceeds will be used towards repaying debt, which may include the buyback of its bonds due 2081 under its tender offer. Any remaining proceeds would be used for general corporate purposes.
YPF LUZ (YPF Energia Electrica) raised $420mn via an 8Y bond at a yield of 8.2%, inside initial guidance of high-8% area. The senior unsecured bonds are rated Caa3/CCC. Proceeds will be used towards repayment and/or refinancing debt (including the call redemption of its 2026s), working capital and other purposes. The notes have amortizations equal to 33% in 2030, 33% in 2031 and 34% in 2032, with a weighted average life of about 7Y.
Rabobank raised $1.25bn via a two-part deal. It raised $750mn via a 5Y bond at a yield of 4.494%, 25bp inside initial guidance of T+85bp area. It also raised $500mn via a 5Y FRN at SOFR+89bp vs. initial guidance of SOFR equivalent area. The senior preferred bonds are rated Aa2/A+. Proceeds will be used for general corporate purposes.
New Bonds Pipeline
- Adani Hybrids Renewables hires for $ 20Y bond
Rating Changes
- Fitch Upgrades Ithaca Energy to ‘BB-‘ on Eni UK Deal; Assigns ‘BB-(EXP)’ to New Bond
- Two Mongolian Banks Upgraded To ‘B+’ On Improved Business Stability; Outlooks Stable
- Moody’s Ratings upgrades Ithaca to Ba3; stable outlook
- Moody’s Ratings downgrades The Phoenix Insurance Company’s IFSR to Baa1 following sovereign rating action, outlook remains negative
- Moody’s Ratings changes Damac’s outlook to positive, affirms Ba2 rating
- Fitch Revises Outlook on FORVIA to Negative; Affirms IDR at ‘BB+’
Term of the Day
Catastrophe Bonds
Catastrophe bonds also referred as Cat bonds are risk-linked securities that are designed in favor of the issuer as these allow the transfer of risks related to a major catastrophe or a natural disaster to the investors. These are generally high yield debt instruments that payout to issuers in case of specific triggers. These bonds essentially act as insurance policies for the issuer against natural disasters, where they pay regular coupons (premium) in exchange for protection. In the event of a natural disaster trigger, issuers will receive a payout from the proceeds of the bond and the principal repayment and interest payments are either deferred or cancelled. If a trigger event doesn’t occur, the issuer continues to pay the coupons as scheduled, similar to a regular bonds and proceeds are returned to the investors at maturity. Cat bonds are generally purchased by governments, insurance and reinsurance companies. These bonds have gained traction as the frequency of natural disasters is on the rise.
Bloomberg notes that investors in catastrophe bonds are preparing themselves for substantial losses on account of the impact by hurricanes Helene and Milton.
Talking Heads
On Buying Five-Year Bonds as Fed Sticks the Soft Landing – Pimco
Pimco economist, Tiffany Wilding and Global Fixed Income CIO, Andrew Balls
“The US economy, like others, appears poised to achieve a rare soft landing – moderating growth and inflation without recession. Cash rates are set to decline alongside policy rates, while high government deficits may drive long-term bond yields higher over time…. US deficits will be the biggest loser no matter which party wins”
On Buying ‘Safe’ Assets on Risk That US Soft Landing Fails – Mizuho’s Kenya Koshimizu
“Expectations of market participants are a bit too concentrated on a soft landing… makes the markets vulnerable if any signs of hard landing emerge or the economy picks up steam again.”
On US Bond Yields ‘Closer to Fair’ After Selloff – BlackRock
“As we are going into the election, things look much closer to fair. We were more bearish on the front end of the curve recently and have pared that… have a plan, in terms of how to react to the different outcomes because the election is so close”
Top Gainers & Losers 10-October-24*
Go back to Latest bond Market News
Related Posts:
US Economy Grew at 4.9% in Q3; Treasury Yields Move Lower
October 27, 2023
ADP Payrolls Softer Than Expected
December 7, 2023
BondbloX Pte. Ltd. is regulated by the Monetary Authority of Singapore as a Recognised Market Operator ("RMO") and exempted from Section 49(1) of the Securities and Futures Act (Cap. 289) ("SFA") under Section 49(7) of the SFA.