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Bond Market News
Fed in ‘Wait and See’ Mode, Keeps Rates Steady; Medco Launches $ Bond
May 8, 2025
US Treasury yields eased marginally across the curve. The FOMC unanimously voted to keep rates unchanged as expected, with Fed Chairman Jerome Powell noting that they were “in a good position to wait and see” how the US tariff policy related uncertainty plays out.
Looking at equity markets, the S&P and Nasdaq were both higher by 0.3-0.4%. Looking at credit markets, US IG CDS spreads were tighter by 1bp, while HY CDS spreads tightened by 6.2bp. European equity markets ended lower. The iTraxx Main CDS spreads tightened by 0.1bp and Crossover CDS spreads tightened by 0.9bp. Asian equity markets have opened broadly higher today. Asia ex-Japan CDS spreads were tighter by 1.5bp. The PBOC reduced its 7-day reverse repo policy rate by 10bp to 1.40%, and also lowered the reserve requirement ratio for major banks by 50bp to 9.0%.
New Bond Issues
- HSBC $ 6NC5/6NC5 FRN/11NC10 at T+115/SOFR Equiv/T+170bp
- Medco Energi $ 5NC2 at 9.125% area
Al Rajhi raised $500mn via a 5Y bond at a yield of 4.865%, 30bp inside initial guidance of T+125bp area. The senior unsecured note is rated Aa3/A-, and received orders of over $1.1bn, 2.2x issue size. Proceeds will be used for general corporate purposes.
Barclays raised €$2.5bn via a two-trancher. It raised €1.25bn via a 4NC3 FRN at 3m Euribor+110bp, 4bp inside inside initial guidance of 3m Euribor+114bp area. It also raised €1.25bn via a 6.25NC5.25 bond at a yield of 3.543%, 27bp inside initial guidance of MS+165bp area. The senior unsecured notes are rated Baa1/BBB+/A. Proceeds will be used for general corporate purposes.
Rating Changes
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Fitch Downgrades Victoria PLC to ‘CCC+’
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Honda Motor Outlook Revised To Negative On Likely Impact Of U.S. Tariffs; ‘A-/A-2’ Ratings Affirmed
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Moody’s Ratings changes Volvo Cars’ outlook to negative from stable, affirms Ba1 rating
New Bonds Pipeline
- Pertamina Hulu Energi hires for $ 5Y/10Y bond
Term of the Day: Euribor
Euribor is an average unsecured inter-bank rate complied from a panel of 20 large European banks that lend money on an overnight basis to one another in Euros. Maturities on loans used to calculate Euribor often range from one week to one year. Euribor is generally considered as a reference rate for pricing bonds denominated in Euros. The equivalent of Euribor in the US is the USD Libor rate.
Talking Heads
On Investors at Milken eyeing foreign shores as tariffs cloud US outlook
Purnima Puri, HPS Investment Partners
“We’ve spent a lot of time focused on the U.S. and Europe, and historically, we have had a little bit of a bias towards the US… Europe is starting to look significantly more interesting”
Lee Kruter, GoldenTree Asset
“At the start of the year, I think the view was that the US was the place to be, and that’s where capital is going to flow, and … that has shifted differently… In the first quarter we looked for opportunities in Europe”
Alan Schwartz, Guggenheim Partners
“I believe that the underlying foundation of the dollar and Treasury market has been eroding over the last number of years, and we better pay attention to it pretty soon”
On Powell Saying Fed Won’t Be Rushed
James Egelhof, BNP Paribas
“Absent a decisive turn in the US economic data, the FOMC seems comfortable remaining on hold indefinitely… FOMC is waiting for conviction of whether the next move is a cut based on the economy moving towards a recession or whether it’s a move towards more restrictive policy due to high inflation “
Claudia Sahm, New Century Advisors
“I think generally when we watch the Fed, they have much less of the ‘masters of the universe’ vibe going right now”
On Treasuries Rising as Fed in No Hurry to Cut Despite Higher Risks
Jason Pride, Glenmede
Path for monetary policy from here is “conditional on whether the ‘stag’ or the ‘flation’ emerges as the bigger risk”
Ashish Shah, Goldman Sachs Asset
Fed appears stuck “in a holding pattern as it waits for uncertainty to clear.”
Top Gainers and Losers- 8-May-25*
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