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US stock markets ended the week in the green after the Non-Farm Payrolls report for May, where 559k jobs were added vs. 278k in April. The number was lower than the expectation of 671k. S&P was up 0.9% and the tech heavy Nasdaq was up 1.5% on Friday. The unemployment rate dropped to 5.8% from 6.1%, better than the expectation of 5.9%. US 10Y Treasury yields were 7bp lower to 1.56%. In Europe, DAX led the gains, higher by 0.4% while FTSE and CAC were up ~0.1% each. US IG and HY CDS spreads tightened 0.7bp and 4.5bp respectively. EU main and crossover CDS spreads tightened 0.6bp and 2.9bp respectively. Asian markets are flat with Asia ex-Japan CDS spreads tightening 2.5bp.
AIA Group raised S$500mn via a Perpetual non-call 10Y (PerpNC10) tier 2 bond at a yield of 2.9%. The bonds were rated A2. If not called on the first call date of June 11, 2031, the coupon resets to the prevailing SOR + initial credit spread of 133bp. There is no step-up. The coupon is deferrable and cumulative on a compounded basis. Bankers said the deal had been quietly offered to a limited group of investors, suggesting that it was either a private placement or a result of reverse enquiries (Term of the day, explained below). Proceeds will be used for general corporate purposes.
Putian State-owned Assets Investment raised $85mn via a tap of 4.7% 2024s at a yield of 4.7%. The bonds were rated BB+. The issuer is owned by the government of the Putian municipality in China’s Fujian province. Proceeds will be used for investments in domestic project construction and working capital purposes. The company had priced its debut $180mn 3Y bond at 4.7% earlier this year on April 20.
US primary market issuances dipped to $21.3bn, down 22% vs. $27.4bn in the week prior led by HY. IG issuances were lower last week at $16.4bn vs. $15bn in the prior week while HY issuances were down to $3.97bn vs. $12bn in the prior week. The largest deals in the IG space were led by Citigroup’s $3.15 two-trancher and Truist Financial’s $2bn deals. In the HY space, Lume Tech’s $1bn and Energy Transfer’s $900mn bond deals led the table. In North America, there were a total of 43 upgrades and 22 downgrades combined across the three major rating agencies last week. LatAm saw $4.3bn in issuances after two straight quiet weeks. The issuances were led by Petrobras’ $1.5bn 30Y to buyback bonds and Cemex’s 5.125% PerpNC5.25 deals. EU Corporate G3 issuances saw a sharp drop last week to $15bn vs. $37.4bn in the week prior – the table was led by Nestle’s €3.15bn ($3.8bn) four-trancher, SocGen’s $2.5bn dual-trancher and Vodafone’s $1.95bn two-trancher. Across the European region, there were 27 upgrades and 14 downgrades across the three major rating agencies. GCC and Sukuk G3 issuances were muted last week vs. $5bn in the week prior. Across the Middle East/Africa region, there were no upgrades and 3 downgrades across the three major rating agencies. APAC ex-Japan G3 issuances were flat at $11.2bn vs. $11.3bn in the prior week. Indonesia’s $3bn three-trancher led the issuances followed by Indofood’s $1.75bn two-trancher, Worley US’s €500mn ($611mn) and Industrial Bank HK’s and $600mn deals. In the Asia ex-Japan region, there were 6 upgrades and 15 downgrades combined across the three major rating agencies last week.
A reverse enquiry is an inquiry made by a potential investor to an issuer about purchasing a particular debt security in a one-off transaction. Here, the banker to the transaction acts as an agent to the institutional investor and tailors the issuance to meet the investor’s needs.
AIA Group raised S$500mn via a PerpNC10 tier 2 bond with bankers saying it was either a private placement or a result of reverse enquiries. Unlike typical bond issues which are launched with an initial guidance and priced later in the day or in the following day, AIA’s bonds came to the market at a final price guidance of 2.9%.