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Bond Market Insights - Wed, 01 Mar 2023

In the U.S. Consumer Confidence retreated yesterday as house price inflation was seen cooling. There was an unexpected jump in inflation, adding to ECB’s headache as France and Spain preliminary data for February came in higher than consensus estimates. This scenario could be reinforced by German CPI where higher fuel prices may be the biggest driver of an expected jump, Italy follows suit on Thursday.

US investment grade was as much as +3bps weaker as a slew of primary deals hit the market. Seven borrowers totalled $11bln, bringing the week to $30bln. American Tower (Baa3/BBB-) issued 5’s at +160, 10’s at +180, both 20bps inside reoffeer. The Cigna Corp (Baa1/A-) 10yr came at +150, Florida Power (Aa2/A+/AA-) 10yr was issued at +140, all quite compressed.

We had some good demand for the HSBC Holdings PLC perp, a $2bln Perp NC5.5 Subordinated Contingent Convertible bond. The initial price talk was 8.5% in Asia, which brought out a lot of interest from private wealth and private banks. The bond was eventually launched at 8%. This morning the issue opened at reoffer price, but fresh buying took it up to trade around 101.00.

In Asia the Sumitomo’s are out. Sumitomo Trust is pushing a three-tranche deal with 3yr fixed and floating and a 5yr green bond, initial talk at 3yr +140, 10yr +165. The proceeds of the green bond will be “used for financing and/or refinancing, in whole or in part, of existing and future qualifying environmental projects (Eligible Green Projects)” as defined in Sumi Trust’s Green Bond Framework. This should be priced in NYC tonight. Sumitomo Corporation is also out, holding investor calls today with regard to a 5yr bond, expected launch tomorrow.

Nanyang Commercial Bank (A3) priced a $300mm tier 1 subordinated perpetual issue with a 5yr call this morning with an initial coupon of 7.35%. Bank of China is B&D. it traded down to a low print of 99.40 before settling around par, early flippers being countered by fund and retail buying

A bit of a hiccup for Country Garden as the Chairman resigned this morning. COGARD 26’s started the day down 2 points.

Vedanta broke its weekly 3pt decline as announced that it was fully confident of meeting its upcoming maturities this quarter and has “multiple options for both refinancing”, including a new $1bn loan from a syndicate of banks that is at an advanced stage of negotiation. Bonds bounced 1.5pts this morning.

Elsewhere in Asia yesterday saw good buying of Adani, both ADANIG and ADSEZ. China core names also remained strong. Asia opened 1~3 bps wider in CDS, bonds were fairly much unchanged. South East Asia was 3bps tighter on the back of the new Kasikornbank which printed on Monday, $600mm Baa11 rated bullet at +125 over treasuries. It traded as tight as +115 with good size buying from locals, real money and funds.

We have seen good demand for the short end of the US treasury curve, both bills and 1-2yr notes as yields of 5%+ become available and there is a feeling that markets are overvalued and the risk premia for both credit and equities is too slim.


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