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Bond Market News
NAB, Wing Tai, Hotel Properties Launch Bonds; ISM Manufacturing PMI 48.5
June 3, 2025
US Treasury yields were stable across the curve on Monday. The US ISM Manufacturing PMI for May was softer at 48.5 vs. expectations of 49.5, contracting for a third consecutive month. Separately, Dallas Fed president Lorie Logan said that the Fed can “wait for the data, to be patient” whilst assessing risks to inflation and employment. Her counterpart, Chicago Fed’s Austan Goolsbee said that the Fed will be able to lower rates within the next 15 months once the tariff uncertainty clears.
Looking at US equity markets, S&P and Nasdaq were higher by 0.4% and 0.7% respectively. Looking at credit markets, US IG and HY CDS spreads tightened by 1.1bp and 4bp respectively. European equity indices ended mixed. The iTraxx Main and Crossover CDS spreads were marginally wider. Asian equity markets have opened broadly higher today. Asia ex-Japan IG CDS spreads widened by 1.6bp.
New Bond Issues
- NAB $ 3Y/3Y FRN/5Y at T+65bp/SOFR eq./T+75-80bp area
- Wing Tai Holdings S$ 7Y at 4.05% area
- Hotel Properties S$ 5Y at 4.65% area
Rating Changes
- Moody’s Ratings downgrades Kosmos Energy to B3, outlook is negative
- Moody’s Ratings downgrades Azul’s ratings to Ca on filing for chapter 11; outlook negative
Term of the Day: GDP-Linked Bonds
GDP-linked bonds are fixed income securities, whose payouts are linked to the GDP of a country. These bonds are typically issued by governments and pay more to investors if their economy is growing and vice versa. The idea of GDP-linked bonds was first proposed by Nobel laureate Robert Shiller in the 1990s. The structure of these bonds are designed in a way that support the borrower in times of poor economic activity, and hence are typically used by countries facing a crisis. Countries that have issued such securities in the past include Costa Rica, Bulgaria, Bosnia and Herzegovina, Argentina and Greece.
Talking Heads
On BOJ Likely to End Undercutting Bond Purchase – Makoto Sakurai, ex-BOJ Board Member
“They are likely to make a stop. They must be considering that yields will rise further if they go big on cutting bond purchases…It’s a little risky to make a long-term commitment when uncertainties are this high…a higher yield could be problematic”
On Aramco Underlining Bid for Long-dated Credit – IFR
Eddie Hebert, PPM America
“Yet yields look pretty attractive historically, and that is what is enticing buyers into the market”
Tom Murphy, Columbia Threadneedle
“So as the long end of the Treasury market gets a little bit unhinged, I think that that 6% yield for long corporates is just really something that the yield buyers really find attractive.”
Scott Schulte, Barclays
“We haven’t seen a 5% yield on the 30-year US Treasury in many years and so it is the tenor of choice for most investors right now…There is incredible demand”
On Big Money Managers Staying Away From Beaten-Up US 30-Year Bond
Bill Campbell, DoubleLine
“Where we can outright short it…we are in a steepener…But in other strategies where it’s purely long only, we’re just basically doing a buyers’ strike and moving to invest more in that middle part of the curve”
Bob Michele, JPMorgan Asset Management
“I don’t want to be the one to stand in front of the steamroller right now… I’m concerned that it’s going to get worse before it gets better.”
Mohit Mittal, Pimco
“Certainly if there is a bond-market rally, in our view it’ll be led by the five- to 10-year point”
Jamie Patton, TCW
“We wouldn’t just look at the 30-year bond and say 5%, let’s buy it…We would look at it and say it’s actually still pretty rich versus the rest of the curve.”
Top Gainers and Losers- 03-Jun-25*
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