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Bond Market News

Kaisa, Sun Hung Kai Launch $ Bonds; Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers

US markets added to last week’s gains as tapering fears cooled down – the tech heavy Nasdaq closed 0.9% higher while S&P ended 0.4% higher. The gains were led by Real Estate and IT up ~1.1% while the losses were led by Financials and Energy down 1.5% and 1.2% respectively. European markets also traded in the green – FTSE, DAX and CAC gained 0.4%, 0.2% and 0.1% respectively. Saudi’s TASI and UAE’s ADX added 0.7% and 0.4% respectively. Brazil’s Bovespa lost 0.8%. Asian markets were mixed  – HSI and Singapore’s STI were down 1.4% each, Shanghai was down 0.8%. Nikkei and KOSPI were up 0.5%. US 10Y Treasury yields eased 4bp to 1.27%. US IG and HY tightened by 0.4bp. EU Main CDS spreads were flat while Crossover CDS spreads tightened 3.8bp. Asia ex-Japan CDS spreads tightened 3.3bp.


Eurozone consumer confidence dropped to negative -5.3 in August from negative 4.4 last month. The German YoY CPI posted 3.9%, up 0.1% from August 2020. The Spanish CPI YoY also posted 3.3%, up 0.4% compared to last year. Chinese composite PMI for August came in at 48.9 vs. 52.4 last month.


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New Bond Issues

  • Sun Hung Kai $ 5Y bond at 5.35% area
  • Kaisa Group $ 364-day bond, FPG at of 11%
  • Jinan Financial Holding $ 3Y bond at 4.2% area
  • Chongqing International Logistics Hub Park Construction $ bond tap of $160mn 5.3% 2024s, FPG at of 5.3%

New Bond Issues 31 Aug (1)

Zhenro Properties Group raised $250mn via a 363-day green bond at a yield of 6.93%, 47bp inside the initial guidance of 7.4% area. The bonds have expected ratings of  B+ and received orders over $2.8bn, 11.2x issue size. Proceeds will be used for debt refinancing. Asia and EMEA took 95% and 5% respectively. Fund and Asset Managers took 89% and private banks 11% respectively. The new bonds offer a new issue premium of 65bp over its older 8.7% bonds due August 2022 that are currently yielding 6.28%.

Xuchang General Investment raised $53mn via a 3Y bond at a yield of 4.8%, inline with the initial guidance. The proceeds from the unrated bonds will be used for project construction and general corporate purposes. The issuer is a municipal infrastructure construction and operation entity in Xuchang city in China’s Henan province.


New Bonds Pipeline

  • Japan Tobacco hires for $  10Y, $ 30Y Formosa to fund tender offer
  • Adani Green Energy $ 144A/Reg S senior secured green bond 
  • Axis Bank $ 144A/Reg S sustainable perpNC5 AT1
  • Chiba Bank $ 5Y Reg S bonds; calls today
  • Changchun Urban Development & Investment Holdings $ Reg S bond; investor calls today
  • AC Energy $ Reg S fixed-for-life green perp; investor calls starting today
  • Aozora Bank $ Reg S 3Y bond; investor calls starting today


Rating Changes


Term of the Day:

Rights Issue

A rights issue is one way for a company to raise capital by giving existing shareholders the option to buy additional shares of the company, typically at a discount to the current market price. The number of additional shares that can be bought is proportionate to the number of existing shares that a shareholder has. This ratio is also known as a rights entitlement ratio. Since a rights issue increases the number of shares of a company, share dilution may occur as the company’s earnings are now spread over a greater number of shares.

Bharti Airtel’s board of directors has approved plans for the company to raise up to INR 210bn ($2.86bn) through a rights issue.


Talking Heads


“On monthly volumes, we are looking at the favorable financing conditions, and we should underline that they are more favorable than at our June meeting,” Villeroy said. “We have to decide the monthly volumes for the fourth quarter.” “Powell marked a disconnect in time on decisions on purchases and later on the rates, and he even suggested much later,” Villeroy said. “I think this disconnection probably applies on both sides of the Atlantic, without stating figures or calendar.”


Sergey Dergachev, senior portfolio manager at Union Investment
“This assumption is not valid anymore,” says Dergachev.
Wu Qiong, head of fixed income research at BOC International Holdings Ltd
“The government has no strong incentive to rescue it, at least not directly involved like this,” she says.
David Loevinger, former senior coordinator for China affairs at the US Treasury
On Huarong being too big to fail, “now, you cannot say that with 100% certainty.”


On investors shunning Chinese high-yield debt after Evergrande shock

Edmund Goh, investment director at Aberdeen Standard Investments
“I would think that most of the weakness is contributed by the property developers.” “If Evergrande moves then it will have a pretty sizeable impact.”

Bruce Pang, head of research at investment bank China Renaissance
“[Developers] will continue to face liquidity drains in the near term… [and restrictions on] land auctions and fundraising opportunities”.


Nagi Hamiyeh, joint head of Temasek’s investment group
“There are other pools of capital, for example from Asia, that would use it as an opportunity,” he said. “So I wouldn’t say it necessarily affects the valuation. It will change the mix of institutional investors in these stocks.”
Lim Chow Kiat, chief executive officer Singapore’s sovereign wealth fund GIC
“China assets continue to offer good entry levels,” he said. “Especially relative to so-called developed-market valuations.”
Jeffrey Jaensubhakij, GIC’s chief investment officer
“We wouldn’t necessarily be transacting directly with a U.S. investor to take anything out of their hands,” he said. If “prices drop and therefore our expected return on that asset moves up and becomes compelling relative to other things available to us then we naturally would look in.”
Stephane Monier, chief investment officer at Lombard Odier
“The Chinese central bank will have a more accommodative stance. We don’t think there will be risk of monetary tightening in the short future,” Monier said. “We think a large portion of the needed regulatory adjustments are now behind us.”
Sean Taylor, DWS APAC Chief Investment Officer
“They’re having a re-rating relative to Chinese and U.S. peers because they’re quite cheap,” he said. “As we see more of a pickup in India we will probably allocate more to financials and recovery plays.” “We thought it’d damp down at the end of this year but I think it’ll continue for another year or so,” he said.


Top Gainers & Losers – 31-Aug-21*

BondEvalue Gainer Losers 31 Aug (1)

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