US markets inched higher to extend the record breaking streak for another day – S&P and Nasdaq gained ~0.2%. Financials were up 1.2% while Energy and Industrials were up more than 0.5%. Healthcare and Real Estate were down 0.3% and 0.2% respectively. European markets looked for direction – FTSE and CAC were up 0.3% and 0.2% while the DAX was down 0.3%. Saudi’s TASI extended its gains by 0.1% while UAE’s ADX was down 0.2%. Brazil’s Bovespa gained another 0.5%. Asian markets have opened lower – HSI and Shanghai are down ~0.5% to 1%, while Nikkei and Singapore’s STI are hovering near yesterday’s close. US 10Y Treasury yields edged up another 5bp to 1.34%. US IG tightened 0.7bp while HY CDS spreads tightened 2.5bp. EU Main and Crossover CDS spreads also tightened 0.2bp and 0.3bp respectively and Asian ex-Japan CDS spreads tightened by 0.5bp. The Asian primary markets are having a rather busy day after a few slow weeks with six new dollar deals launched today, the highest number of deals in a day since July 19 that saw 8 new deals.
German Business Expectation in August posted 97.5 vs. expectations of 100 and against last month’s 101. Spanish PPI came in at 15.3% inline with expectation. Brazil’s mid-month CPI for August came in at 9.3%, slightly higher than expectations of 9.24% and above 8.59% YoY.
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China Merchants Bank Luxembourg branch raised $600mn through a dual trancher. It raised $300mn via a 2Y SOFR (Term of the day, explained below) sustainability bond at a yield of 0.55%, 35bp inside the initial guidance of SOFR+85bp area. It also raised 300mn via a 5Y carbon neutrality-themed green fixed-rate bond at a yield of 1.345%, 40bp inside the initial guidance of T+95bp area. The bonds have expected ratings of A3 and received combined orders over 3bn, 5x issue size. Proceeds will be used to finance and/or refinance eligible projects as defined in the bank’s green, social and sustainability bond framework. China Merchants Bank would become only the second Chinese issuer in the SOFR market after Bank of China printed the first SOFR bond in 2019, as per IFR.
Bank of Nova Scotia raised €750mn via a 7Y bond at a yield of MS+50bp, 15bp inside the initial guidance of MS+65bp area. The bonds have expected ratings of A2/A-/AA- and received orders over €860mn, 1.1x issue size. The issuance comes just a day after it reported earnings for the quarter ended July.
Secured Overnight Financing Rate (SOFR) is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities. SOFR is calculated as a volume-weighted median of three rates – tri-party repo data collected from BNY Mellon, General Collateral Financing (GCF) Repo transaction data and data on bilateral Treasury repo transactions cleared through FICC’s DVP service, which are obtained from DTCC Solutions LLC. SOFR was selected as the representative rate for use in USD derivatives, and was suggested as an alternative to LIBOR. The transition from LIBOR to SOFR is expected to happen by next year.
China Merchants Bank Luxembourg branch priced a 2yr sustainability floating rate note linked to SOFR on Wednesday.