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Bond Market Insights - Thurs, 30 Nov 2023

There was a wave of soft inflation readings yesterday from Australia, Germany, and Spain. In the US, GDP rose at the fastest pace in nearly two years, while consumer spending advanced more gradually. News that OPEC+, which includes Russia, Bahrain and Oman, might lower its productivity by 1mm BPD was ignored outside the oil market, Brent jumping to $83.

US Treasuries extended their gains, yields falling 5-9bps across the curve. The Fed Beige Book pointed to increased growth pressures throughout the economy. Bostic is confident in inflation’s decline while Barkin is less certain and thinks that a rate hike is still possible. The market is more assured, pricing in not more rate hikes and a full 25bps cut in May 2024.

Bill Ackman seems to be emulating the great Bill Gross, in broadcasting his positions once they are in place. He thinks the Fed could cut rates as soon as Q1.

Credit markets are strong. US IG tightening up to 3bps yesterday. The US new issue market is pumping in this week’s rally, printing $4.35bn yesterday, taking this week’s total to $17bn. For the month issuance is over $100bn, only the 6th time ever. Year to date stands at $1180.93bn vs $1200 for 2022.

The rally in rates, coupled with a tightening in credit propelled Asia IG returns to +3.6% this month. The primary market out here is still creeping along, crimping the supply side. The successful return of the European AT1’s has helped their Asian counterparts, particularly in India, to attain new highs, with strong Private Bank and Hedge Fund demand. The front end has been a bit flush with paper over the last couple of weeks as markets rallied but is becoming more balanced now.

Adani, which fell out of favour after the Hindenburg speculation, has had a stellar move this month. Bonds are up between 4pts and 8pts, spreads are 60-130bps tighter. The complex was encouraged by the current Adani Energy ADANEM 3.949 02/12/30 tender. The bond is now trading at T+425bps, which is not too far from the pre-report 2023 tights of +400bps. Adani Green will hold an EGM on 21st Dec to vote on the proposed transaction where TotalEnergies will acquire a 50% stake in Adani Renewable Energy Nine for USD300mm


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