US markets carved out a winning week with the S&P up 0.3% on Friday reaching another record while Nasdaq was broadly flat; they ended the week higher by 2.7% and 2.4% respectively. The gains came on the back of weaker than expected inflation data and President Biden securing an infrastructure agreement with lawmakers. Financials, up 1.3%, once again led on Friday after the Fed indicated that the banking industry could withstand a severe recession. IT, down 0.15%, dragged the markets lower. US 10Y Treasury yields trended higher by 2bp to end the week at 1.52%. The increase came after the Fed’s main inflation reading, Core PCE rose 3.4%, the most since 1992, on supply constraints and increased demand for services in May. Consumer spending remained broadly flat vs. a 0.9% increase in April. European bourses also finished the week slightly higher – FTSE and DAX were up 0.4% and 0.1% while CAC was down 0.1%. US IG and HY CDS spreads tightened 0.8bp and 3.6bp respectively. EU main and crossover CDS tightened 0.5bp and 2bp respectively. Saudi TASI and Abu Dhabi’s ADX were up 0.4% and 2% respectively. Brazil’s Bovespa reversed gains and was 1.7% down. Asian markets opened mixed – Singapore’s STI was up 0.3% and Shanghai up 0.1% and Nikkei was down 0.1%. Asia ex-Japan CDS spreads were 0.5bp tighter. It’s a busy start to the week at the Asian primary markets with six new dollar deals launched.
Zhongyuan Yuzi Investment raised $300mn via a 5Y bond at a yield of 3.2%, 3bp inside initial guidance of 3.5% area. The bonds are rated A2/A and received orders over $1.1bn, 3.7x issue size. The issuer is Zhongyuan Zhicheng and the bonds are guaranteed by Zhongyuan Yuzi Investment. The Chinese LGFV will use proceeds for offshore debt refinancing and general corporate purposes.
Mirae Asset Securities hires for $ green bond; calls starting today
US primary market issuances were marginally higher at $23.1bn vs. $21.8bn in the week prior led by IG. IG issuances rose last week to $15.1bn vs. $13.2bn in the prior week while HY issuances were lower at $6.4bn vs. $8.25bn in the prior week. The largest deals in the IG space were led by JPMorgan’s $2.5bn dual-trancher, HCA’s $2.35 dual-trancher and Centene Corp’s $1.8bn issuance. In the HY space, ITT Holdings’ $1.22bn deal and Ford’s $1bn deals led the table. In North America, there were a total of 62 upgrades and 14 downgrades combined across the three major rating agencies last week. LatAm saw $4.51bn vs. $1.2bn in issuances in the prior week, led by the Panama government’s $2bn dual-trancher and Panama Bonos’ $1.25bn deal. EU Corporate G3 issuances were slightly lower at $21.6bn vs. $24.1bn in the week prior – primarily dominated by financial institutions with Santander’s $1.5bn 3NC2 deal, StanChart’s $1.25bn 11NC10 deal and UniCredit’s €1bn ($1.2bn) deal leading the table. Across the European region, there were 30 upgrades and 771 downgrades across the three major rating agencies – the massive number of downgrades was largely on account of S&P’s downgrade of 7 German banks and their various related entities. GCC and Sukuk G3 issuances were lower at $1bn vs. $2.65bn in the week prior led by Kuwait Finance House’s $750mn AT1 Sukuk and Emirates NBD’s $250mn 5Y deal. Across the Middle East/Africa region, there were no upgrades but 11 downgrades across the three major rating agencies. APAC ex-Japan G3 issuances were at $9.1bn vs. $6.1bn in the prior week – KEXIM’s $1.5bn two-trancher led the table followed by KHFC’s €1bn ($bn) social covered bond and CCB’s (HK Branch) €800mn ($952mn) 3Y bond issuance. Other large issuances included BCEG HK Co’s $600mn, Fosun’s €500mn ($596mn) and BOCOM International’s $500mn new bond deals. In the Asia ex-Japan region, there were 9 upgrades and 6 downgrades combined across the three major rating agencies last week.
A bad bank is a bank set-up to buy bad loans and other non-performing assets from banks. While it may help reduce systemic impacts in the financial system, critics note that it may create moral hazard risks. India is set to have a bad bank by month-end called the National Asset Reconstruction Company (NARCL). NARCL will take over the bad loans from banks by paying 15% in cash and 85% as security receipts. The security receipts will be backed by a government guarantee, which is likely to ensure the face value of the security receipts.