Asian stocks are opening 1.5%-2% higher this morning even with Hong Kong on holiday. US index futures are higher by 0.3%-0.5%. Asian equity markets were poised to gain on Thursday, tracking Wall Street’s rally after positive trial results of an experimental Covid-19 treatment, FOMC’s pledge to shore up the economy and a jump in oil prices. The rally was led by surging technology stocks. Investors are taking comfort from the Fed’s intent to maintain efforts to boost the economy until officials are “quite confident that the economy is well on the road to recovery.” Yields traded in a narrow range earlier in the session after data showed that the US GDP shrank at a 4.8% annual pace in the first quarter, the steepest three-month decline since the last recession. Oil prices surged more than 10% after U.S. crude stockpiles grew less than expected and gasoline posted a surprise draw, feeding optimism that fuel consumption would recover as some European countries and U.S. states ease coronavirus lockdowns.

 

New Bond Issues

  • Fraser Centrepoint S$ 3yr @ 3.35% area

 

Chinese film distribution and property development company Nan Hai Corp raised $500mn via two-year non-call one credit-enhanced bonds at a yield of 3.5%, 50bp inside initial guidance of 4% area. The proposed bonds have an irrevocable standby letter of credit denominated in USD by China Citic Bank Shenzhen branch (Baa2/BBB+/BBB). The bonds are expected to be rated BBB+ by S&P. The bond received orders of $1.5bn or 3x issue size.

Shuifa Group, rated Baa3, raised $350mn via 3Y bonds at a yield of 4.3%, 30bp inside initial guidance of 4.6% area. The bonds will be issued by a wholly owned subsidiary and guaranteed by Shuifa Group. This issue offers a premium of 15bp compared to the 4.15% yield on its debut issue in September 2019 when it raised $400mn via 3Y bonds at a yield of 4.15%.

 

Credit Ratings and Outlook Changes

Boeing Downgraded by S&P to BBB- on coronavirus hit to earnings & cash flow

DBS placed on Rating Watch Negative by Fitch as pandemic hurts asset quality,profitability

OCBC placed on Rating Watch Negative by Fitch on asset quality, profitability concerns

 

Pemex Gets Fiscal Aid from Mexico

Mexico’s Pemex will receive additional fiscal benefits from the government as part of a series of measures to bolster its finances during the oil price rout, the state-owned oil and gas firm said late Monday. The series of measures totaling 113 billion pesos ($4.55 billion) include reduction of Pemex’s 2020 investment budget by 40 billion pesos, and focus on low-cost production fields, according to a letter from the company’s CEO and CFO to investors. Pemex also said the government was granting it a 65 billion-peso tax benefit for the remainder of 2020 that will allow it to reduce its tax burden.

For the full story, click here

 

Nomura’s Take on India’s Credit Rating

Currently, India has a sovereign rating of BBB- with a stable outlook from S&P and Fitch – a grade above the junk category – while Moody’s rates it at the equivalent of one notch above, at Baa2, albeit it changed India’s outlook to negative in November. Nomura believes Moody’s is likely to downgrade India’s rating from Baa2 ‘negative’ to Baa3 ‘stable’ but may wait to get a better handle on the government’s fiscal plans to make a more complete assessment of growth and fiscal impact. Nomura does not expect a downgrade from Moody’s to Baa3 to significantly surprise the markets and even if Moody’s ratings come in line with Fitch and S&P (even with a negative outlook), it sees only a small and short-lived negative impact on Indian rupee. “At the current stage, we judge that an outlook change by S&P is a risk, but we do not believe this is imminent at this stage,” Nomura said. Also, given Fitch’s assessment of debt sustainability and India’s poor fiscal track record, Nomura believes the likelihood of an outlook change to “negative” is elevated.

For the full story, click here

 

April Sees Corporate Debt Spree, Fueled by Fed

Issuance of investment-grade corporate debt in April so far has hit $203.4bn, slightly below March’s record of $234.7bn, buoyed by the Federal Reserve’s unprecedented intervention into credit markets to blunt the economic effects of the coronavirus pandemic. On Wednesday, Fed Chair Jerome Powell said the central bank’s programs have helped restore confidence in markets and allowed companies to secure more private financing. The remarks were made during a news conference after the bank’s two-day policy meeting, the first since its emergency sessions in March and April. In an effort to maintain market liquidity, the Fed has pledged to buy investment-grade bonds as well as select high-yield bonds and shares in some high-yield bond ETFs. That is in addition to the more than $1.2 trillion in loans pledged in the Treasury Department’s Payroll Protection Program for small businesses and its Main Street Lending Program for larger companies.

For the full story, click here

 

Boeing Eyes Major Bond Issuance

Boeing Co is working with investment banks on a multibillion-dollar bond-fueled financing package, aiming to shore up its balance sheet amid a sharp travel downturn from the pandemic, three people familiar with the matter said on Tuesday. The proceeds could amount to $10 billion or more, depending on investor demand, one of the sources added. Boeing is also examining the funding support available to companies from the Federal Reserve, one of the sources said. One of the Federal Reserve’s newly established programs, the Primary Market Corporate Credit Facility, will provide support to companies issuing bonds without placing any strict conditions on them, such as limits to dividend payouts or executive compensation.

For the full story, click here

 

Indian Mutual funds Sell Perpetual Bonds of Banks

Facing redemption pressure after Franklin Templeton India closed six debt schemes, mutual funds houses in India have been liquidating their holdings in perpetual bonds issued by banks. The sell-off has sent yields on these paper surging. Mutual funds were seen dumping additional tier 1 bonds of public sector banks in the secondary market at steep discounts. Perpetual bonds issued by Union Bank of India, Canara Bank and Bank of Baroda were sold in the range of 11.50-14%, nearly 100-350 basis points above their coupon, said market participants. These bonds carry a call option at the end of 2021-22. On Monday, the Reserve Bank of India announced a special liquidity facility of INR 500bn ($6.6bn) for mutual funds. Under this, banks can access funds from the central bank, which will conduct repo operations of at least 90 days at the repo rate.

For the full story, click here

 

Top Gainers & Losers – 30-Apr-20*

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