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US Treasury yields were marginally higher on Tuesday with no major economic data releases. In his congressional testimony, Fed Chairman Jerome Powell said that the US economy is no longer overheated and that the labor market seemed to be “fully back in balance”. At the same time, he said that he did not want “to be sending any signals about the timing of any future actions”. Looking at equity markets, S&P and Nasdaq were up by ~0.1% each. US IG spreads were 0.5bp wider and HY CDS spreads were wider by 0.4bp.
European equity indices ended lower. In credit markets, the iTraxx Main and Crossover spreads were wider by 1.5bp and 5.2bp respectively. Asian equity indices have opened mixed this morning. Asia ex-Japan CDS spreads were 1.2bp tighter.
Astrea raised S$520mn via a 15Y note at a yield of 4.7%, of which S$260mn will be offered via ATM/Internet Banking/Mobile Banking applications and the rest via a public offer. It also raised $200mn via a 15Y note at a yield of 6.7% of which $50mn will be issued via ATM/Internet Banking/Mobile Banking applications and the rest via public offer. The SGD-notes are callable in year 5 and are rated A+. The USD-notes are callable in year 6 and are rated A by Fitch. Both bonds have a step-up coupon structure where, if not called at the first call date, the coupon will step-up by 100bp. Both bonds have a mandatory call feature on their call date or on the first interest payment date post the call date, provided the following conditions are satisfied:
The USD-notes are mandatorily callable only after the SGD-notes have been redeemed in addition to the above two conditions. Proceeds will be used to repay a certain portion of the existing equity shareholder loans, and to pay fees expenses incurred regarding the issuance.
Muthoot Finance raised $100mn via a tap of its 7.125% 2028s at a yield of 6.737%, 27.4bp inside initial guidance of 7.011% area. The senior secured notes are rated BB/BB (S&P/Fitch). Proceeds will be used on-lent and for other activities, in accordance with approvals granted by RBI from time to time in this relation and in accordance with external commercial borrowing guidelines.
Panasonic raised $500mn via a 10Y bond at a yield of 5.302%, 25bp inside initial guidance of T+125bp area. The senior unsecured notes are rated Baa1/A-. Proceeds will be used for general corporate purposes.
Turkiye raised $1.75bn via an 8Y bond at a yield of 7.30%, 32.5bp inside initial guidance of 7.625% area. The senior unsecured bonds are unrated. Turkey has said it plans to borrow $10bn via conventional bonds and sukuk. This is Turkey’s third offshore bond issuance in 2024. In February, it raised $3bn via a 7.875% 2034, followed by a €2bn euro issuance, its first in about three years. The new 8Y notes are priced 11bp wider to its 6.5% bonds due September 2033 that currently yields 7.19%.
First Abu Dhabi Bank raised $750mn via a 10.5NC5.5 bond at a yield of 5.804%, 30bp inside initial guidance of T+185bp area. The subordinated notes are rated A by Fitch, and received orders of over $2.15bn, 2.9x issue size. The new bonds are priced roughly in-line with its existing 6.32% 2034s (callable in 2028) that yield 5.76%.
Kangaroo bonds are bonds issued in Australia by non-Australian issuers denominated in Australian Dollars. These bonds give foreign issuers access to another country’s capital markets and helps them diversify their capital base and could reduce borrowing costs. Although, the currency risk is borne by the issuer. Santander has launched a 10NC5 Kangaroo bond.
On Chinese Bond Traders Fear ‘Dagger to the Heart’ as Yields Vanish
Zhu Zhenxin, chief economist of Asymptote Investment
“The downtrend may persist for many years, before we reach the limits of ultra-monetary easing and rates hit zero… But before then, the rate downtrend in the long run is almost irresistible”
Yongbin Xu, co-CIO at U-shine Investment
“The high-speed growth has passed, but… People will keep doing investment and bond trading”
On China’s $1.6 Trillion LGFV Bond Market Shrinks by Most in Years
Yao Yu, founder of Ratingdog
“Strictly controlling additional debt is the current policy priority”
Zerlina Zeng, Creditsights Singapore
As LGFVs turn to bank loans to refinance their bonds, “we expect LGFV onshore bond net issuance to remain subdued over the rest of 2024”
On LatAm Currencies Jump as Traders Bet on Carry Comeback
Andres Pardo, a strategist at XP Investimentos
“Carry is taking relevance again. LatAm had one of the worst performances in the selloff last month, so in the rebound there’s bigger room to gain.”
Jens Nystedt, a senior portfolio manager at EMSO Asset
“We see limited focus and positioning in Latam FX that makes it attractive. Carry is making a comeback for the rest of summer”