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Bond Market Insights - Thurs, 09 Nov 2023

Longer US Treasuries continued to rally on light volumes, 10-year yields dropped 5.7bps, thanks in part to a passable $40bn auction, and are now off ~50bps from the 5% apex on 10/19. 2yr yields ticked up 1bp, as we pointed out earlier in the week, they are expensive to the Fed Funds rate and need something dramatic to get 2yr yields down further. The next catalyst could be CPI, but that doesn’t print until 14/11.

Oil continued to slide, CLA was down another 2.7%, trading through $75.50 while brent fell below $80, the lowest since late July, another positive for bonds.

The big mover in the new issue market was UBS’s return to the AT1 market with two tranches, both $1.75bn. Pre issue speculation had been for the hybrids to be priced around 10% and then initial price talk came at 9.625 % for the PerpNC5 and 9.75% for the PerpNC10. Eventually both were issued at 9.25%. Both have rallied from launch and the PerpNC5 is trading with a 101 handle and the PerpNC10 even higher, at 102.

In response to reports that Ping An had been asked to buy into Country Garden (2007 HK) Ping An announced they have received no relevant request from any government department or agency and since 2021 have continued to reduce real estate investments, having learnt their lesson from China Fortune Land (600340 CH) They claim that they hold no Country Garden stock.

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