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Bond Market News
Treasury Yields Ease by 4bp; Yapi Kredi, Alinma, Saudi Awwal Price $ Bonds
August 28, 2025
US Treasury yields eased across the curve by ~4bp, despite a modest 5Y Treasury auction that saw a bid-to-cover ratio of 2.36x, slightly higher that the prior month’s 2.31x. Separately, New York Fed President John Williams said that the Fed could “reduce interest rates and still be somewhat restrictive going forward”, ultimately being dependent on how data evolves. He added that unemployment was low, with wage growth staying consistent.
Looking at US equity markets, the S&P and Nasdaq ended 0.2% higher each. US IG CDS spreads were 0.8bp wider and HY spreads widened by 3.4bp. European equity markets ended mixed. The iTraxx Main and Crossover CDS spreads were 1.8bp and 6.5bp wider. Asian equity markets have opened mixed today. Asia ex-Japan CDS spreads were 0.9bp wider.
New Bond Issues
Yapi Kredi raised $500mn via a PerpNC5.5 AT1 bond at a yield of 8.25%, 50bp inside initial guidance of 8.75% area. The junior subordinated note is rated B- (Fitch), and received orders of over $1.3bn, 2.6x issue size. If not called by 4 March 2031, the coupon will reset to the US 5Y Treasury yield plus 444.2bp. A trigger event would occur if, at any time, the CET1 ratio on either a consolidated or an individual basis (if applicable in the future), falls below 5.125%.
Alinma Bank raised $500mn via a PerpNC5.5 AT1 sustainability sukuk at a yield of 6.25%, 50bp inside initial guidance of 6.75% area. The junior subordinated note is unrated. If not called by 3 March 2031, the coupon will reset to the US 5Y Treasury yield plus 243.3bp. Net proceeds will be used to finance and/or refinance, eligible sustainable projects as set out in its sustainable finance framework.
Saudi Awwal Bank raised $1.25bn via a 10NC5 Tier-2 green bond at a yield of 5.947%, 25bp inside initial guidance of T+245bp area. The senior secured note is rated Baa2/BBB (Moody’s/Fitch), and received orders of over $3.3bn, ~2.6x issue size. Net proceeds will be used for to finance and/or refinance, eligible sustainable projects as set out in its sustainable finance framework.
New Bond Pipeline
- BPCE EUR 5Y European Defence Bond Sale
Rating Changes
Term of the Day: European Defence Bonds
These are voluntary labels given after a market-driven initiative, for listed bonds aimed at directing private capital towards eligible Defence and Security projects in Europe. The European Defence Bond Label offers clear eligibility criteria based on the use of proceeds.These are said to form the basis for granting a fast-track admission process. Defence Assets include loans, guarantees, factoring and lease agreements to companies active in the defence and security sector. It can also include contracts or other transactions related to defence and security equipment and services.
BPCE has hired banks for a 5Y European Defence Bond issuance.
Talking Heads
On Once Booming AT1 Market Down to Just One Bond in Brazil
Eduardo Alhadeff, Ibiuna Investimentos
“The supply has shrunk significantly because the local market remains very strong…Banks are able to issue perpetual or Tier 2 notes in Brazil at very tight spreads.”
Milton Maluhy, Itau
“What we did is a liability management…If there is opportunity in Brazil at a good level of price, we may issue more.”
On Fed Unlikely to Flip Stocks Narrative – Ilan Benhamou, JPMorgan
“This market was thriving even as the Fed was on its hiking spree…So whether the Fed stops at 25bp or continues will add a bit of volatility but won’t change things terribly.”
On Boosting Bets Against Long Bonds on Risks to Fed – Citigroup Strategists
“Fears of a weakening of the Fed’s independence has two main market release valves in our view: weaker USD and steeper curve”
Top Gainers and Losers- 28-Aug-25*
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