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Bond Market Insights - Thurs, 27 Apr 2023

Markets were shaky on Tuesday, as the fallout from the U.S. financial troubles continued to deepen. Depositors continue to pull money out of small and medium-sized banks and deposit and CD rates are pushing higher, from close to zero at the beginning of the year to between 4% and 5% as banks try to persuade depositors to stay put. Perhaps a victim of their own greed, having been quick to adjust their mortgage and credit card rates as the Fed hiked, while being slow to adjust depo’s.

Another worry has been whether the US debt limit debate could impact short-term Treasury bills. Yesterday, House Republicans narrowly passed a bill proposing to raise the USD31.4 trillion borrowing limit in exchange for deep cuts in government spending (Source: WSJ)

Treasuries started the NY session with a sharp selloff on the headline "advisors lining up potential purchasers of First Republic stock", then bounced back on "US government unwilling to intervene on FR", then reversed once more into the 5yr auction. The auction went well, and once more it was time to buy into the close.

Durable Goods were strong, up 3.2%mom in March, consensus looked for a 0.7%mom rise. Today we have Jobless Claims, GDP, and PCE today. Supply provided by the 7yr auction.

US IG primary printed over $6bn, led by a $3bn, 4 tranche deal for Enterprise Rent a Car and $2.5bn, 2 tranche deal for Amex. The SMAC Aviation Capital saw good demand for the $650mm SMBCAC 5.45 05/03/28$, it was launched at +200, 40bps inside initial price talk. This morning it is bid at around T10 +195bps. The new BOC Aviation, BOCAVI 4 ⅞ 05/03/33, performed in a similar manner.

In the frontier markets Mongolian Mining Corp decided not to go ahead with the planned exchange and tender offer for 9.25% senior notes due 2024, and hence will not be bringing a new issue.

This morning is pretty much unchanged in Asia so far, with buying interest continuing in the recent new issues.


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