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Bond Market News
FWD, LG Energy, Hyundai Launch $ Bonds
September 18, 2023
US Treasury yields were 3-4bp higher cross the curve. In a positive update regarding the manufacturing sector, the NY Empire Manufacturing Index came at 1.9, higher than expectations of a -10 print. This comes after the manufacturing sector has been undergoing a contraction in the US with ISM Manufacturing prints coming below the 50-mark since November last year. Credit and equity markets showed signs of weakening on Friday – US IG CDS spreads were 0.6bp wider while HY spreads widened by 4.3bp. The S&P and Nasdaq moved lower by 1.2-1.6% on Friday.
European equity markets ended slightly higher on Friday. In credit markets, European main CDS spreads were wider by 0.4bp with crossover spreads widening 0.5bp. Asian equity markets have opened mixed this morning and Asia ex-Japan CDS spreads widened 2.2bp.
New Bond Issues
-
Hyundai $ 3Y/5Y/7Y at T+145/185/210bp
- LG Energy $ 3Y/5Y Green at T+140/170bp area
- FWD $ 10Y at T+290bp area
Energy Development Oman raised $1bn via a 10Y sukuk at a yield of 5.944%, 35bp inside initial guidance of T+200bp area. The senior unsecured bonds have expected ratings of BB/BB (S&P/Fitch).
New Bond Pipeline
- Arcelik hires for $ 5Y bond
- Emirates NBD hires for Sustainable bond
Rating Changes
- Fitch Upgrades Danske to ‘A+’; Outlook Stable
- Moody’s upgrades Greece’s ratings to Ba1, outlook stable
- Moody’s downgrades Seazen Group’s senior unsecured rating and affirms CFR; changes outlooks to negative
- Moody’s downgrades Road King’s ratings to B2; outlook negative
- Moody’s downgrades Sino-Ocean’s ratings to Ca/C; outlook negative
- Fitch Downgrades Longfor to ‘BBB-‘; Outlook Negative
Term of the Day
Blue Bonds
Blue bonds are a type of sustainable debt wherein the proceeds from such issuance are earmarked for marine/water projects related to ocean conservation (hence the name blue bonds). These are similar to green bonds, which are earmarked for green or environmentally-friendly projects. Blue bonds became popular in late 2018 when Seychelles issued the world’s first sovereign blue bond.
Blue bonds arranged by CS and BofA regrading debt swaps for EM issuers are facing renewed scrutiny. This comes after the ICMA issued new labeling guidelines.
Talking Heads
On High-Grade Bond Investors Betting on Duration
Barclays
“Although the rate environment has hurt returns, these moves have pushed the average all-in yield for 25y+ debt to 5.8%, making investment grade debt an increasingly attractive investment opportunity for yield-focused buyers”
Voya Asset Management
“On a spread basis, 30-year bonds don’t look that attractive versus the spread on 10-year bonds. But given the strong technical, 30-year may still outperform for some time”
On Warns of ‘Massive’ Corporate Refinancing Next Year – El-Erian
“If you look at high yield, if you look at commercial real estate, there’s massive refinancing needs next year. Massive. So that’s the point of pain which starts to happen. There are things that have to be refinanced in this economy that cannot be refinanced in an orderly fashion at these rates”
On An Inflation Jump Could Bring Junk Debt Default Wave – BofA
“The CPI report this week reinforced our view that the easy part of the inflation fight is behind us… In CCCs, the ICRs start at barely sustainable 1.3x today and get destroyed in every scenario we consider”
On Corporate Borrowers Are Giving In to High Rates – Wells Fargo
“You’re starting to see, around the edges, a little bit of acquiescing… willing to lean in and recognize that this higher-for-longer narrative is probably with us for some time… Is now the right time to be levering up your balance sheet, refinancing debt, funding acquisitions, digging into capex at these elevated rate levels?”
Top Gainers & Losers- 18-September-23*
Other News
Vedanta to hold a board meeting on Sept 21 to discuss the issuance of NCDs
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