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Bond Market News
SBI, Indonesia Launch $ Bonds
November 18, 2024
US short-end Treasury yields fell by 4-5bp, while long-end yields remained largely stable. US Retail Sales data for the month of October came-in at 0.4% (vs. 0.8% last month), slightly higher than the expected 0.3%. However, Core Retail Sales came-in at 0.1% (vs. 1.2% last month), and softer than the expected 0.3%. However, the Empire Manufacturing Index came-in much stronger at 31.2 (vs. -11.9 last month), with analysts noting that it came on the back of optimism regarding the anticipated domestic boost in manufacturing under Donald Trump’s administration. Markets are still pricing-in about a 60% chance of a rate cut at the FOMC’s December meeting.
US IG and HY CDS spreads widened by 0.4bp and 1.1bp respectively. Looking at US equity markets, S&P and Nasdaq closed lower by 1.3% and 2.2% respectively. European equities followed suit and closed lower across the board too. In terms of Europe’s CDS spreads, the iTraxx Main and Crossover spreads widened by 1.3bp and 8bp respectively. Asian equities opened broadly mixed this morning. Asia ex-Japan CDS spreads widened by 0.7bp.
New Bond Issues
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State Bank of India $ 5Y at T+115bp area
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Indonesia $ 5.5Y/10Y/30Y at 5.3/5.5/5.85% area
New Bond Pipeline
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Adani Renewable Units hires for $ 20Y bond
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Alibaba hires for $ 5.5Y/10.5Y/30Y bond
- San Miguel Global Power hires for $ bond
- Tata Capital hires for $ bond
Rating Changes
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Fitch Upgrades Argentina to ‘CCC’
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JPMorgan Chase & Co. Upgraded To ‘A/A-1’ On Franchise Strength And Expected Continued Solid Performance; Outlook Stable
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Moody’s Ratings upgrades Marks & Spencer p.l.c. to Investment Grade (Baa3); stable outlook
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Fitch Upgrades Ingram Micro to ‘BB’; Removes Rating Watch Positive; Outlook Stable
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Moody’s Ratings downgrades Arabian Centres’ ratings to B1, negative outlook
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Fitch Downgrades Spirit Airlines to ‘CC’
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South Africa Outlook Revised To Positive On Improved Reform And Growth Potential
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Lumen Technologies Inc. Ratings Placed On CreditWatch Positive On Recent Contracts Wins With Hyperscalers
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Outlook On Japan Tobacco Revised To Negative On Russia Risk; ‘A+/A-1’ Ratings Affirmed
Term of the Day
Significant Risk Transfer (SRT)
A Significant Risk Transfer (SRT) is a transaction where banks can deleverage their balance sheet by buying protection on diversified loan portfolios, so that they can release regulatory capital or manage risk. This is typically achieved by selling notes linked to a pool of loans that also include a credit derivative. Selling SRTs may help avoid using less investor friendly measures like dividend cuts, stopping share repurchases or raising new equity to boost regulatory capital levels.
Talking Heads
On EM Bonds Seeming Primed for Losses as Trump Tariff Fears Grow
Rajeev De Mello, Gama Asset
“I’m losing faith in EM local debt as the high likelihood of a new trade war will weaken their currencies and delay the pace of rate cuts”
Societe Generale strategists
“The median pain threshold for 10-year EM bonds is 4.40%, which is close to where 10-year Treasuries are trading”
Jon Harrison, TS Lombard
“Risk premia on all EM assets will be higher as a consequence of Trump policy uncertainty”
On Concerns About Credit Risk in SRTs Are Growing
S&P
“As SRT supply increases, transaction pricing may not remain as favorable to issuers as it has been so far this year”
Zach Wasserman, Huntington Bancshares
“It was really just this goal of both accelerating lending and increasing capital during 2023 and 2024”
On Coupons Help Fuel Demand, Stabilize Spreads for High-Grade Bonds
“Given the rise in rates over the past few years, coupons have grown to be a sizable piece of the demand backdrop, and as such, have created another technical tailwind for credit products… most of the coupons, one way or another, get reinvested back into the IG market”
Top Gainers and Losers- 18-November-24*
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