Asian markets are opening slightly higher this morning with US index futures leading the way. S&P E-mini futures are up 1.0% and Nasdaq E-mini futures are up 1.5%. This comes after a choppy session overnight in US markets as fears from reopening economies prematurely weigh on investor sentiment. The Nasdaq Composite fell 1.40%, while the Dow Jones and S&P 500 slipped 0.13% and 0.52%. European indices also climbed 1-2%. Europe’s main and crossover CDS spreads finished 0.5bp higher and unchanged at 81.5bp and 494bp respectively. The US investment-grade CDS spread narrowed 2bp to 91.5bp. Asia ex-Japan IG CDS spreads narrowed 1bp to 119bp. West Texas Intermediate futures for June slipped 3.7% to trade at $12.31 per barrel. Earlier in the session WTI was down more than 20%, touching a session low of $10.07.

Places like New Zealand have ended their strict lockdown this week and are opening back up, while in other places including the US, the new cases and death rate remain high. Yesterday’s choppiness in the market in the absence of any significant news shows how fragile the equity markets are right now and how mixed sentiment is. Having said that, the volatility yesterday pales in comparison to last month. The CBOE’s VIX Volatility Index, a popular measure of the stock market’s expectation of volatility based on S&P 500 index options has significantly dropped from its highs in March. More quarterly earnings reports coming out later this week will drive sentiment.

New Bond Issues

  • Nan Hai $ 2NC1 @ 4% area
  • Shuifa Group $ 3yr @ 4.6% area


Wharf REIC, rated A2, raised $750mn via 5Y and 10Y bonds. The $450mn 5Y bond was priced to yield 2.444%, 205bp over Treasuries and 45bp inside initial guidance of 250bp area. The $300mn 10Y bond was priced to yield 3.004%, 235bp over Treasuries and 45bp inside initial guidance of 280bp area. Both tranches, guaranteed by the parent, met with strong investor demand with the 5Y receiving orders of $3.9bn or 8.7x issue size and the 10Y receiving orders of $3.7bn or 12.3x issue size.

The Hong Kong based subsidiary of Wheelock and Company last tapped the dollar bond market in September 2019 with a $300mn 5Y bond, which was priced to yield 2.565%, 120bp over Treasuries at the time of issuance.


Credit Ratings and Outlook Changes

Italy downgraded by Fitch to BBB- with negative outlook

China Aluminum Engg downgraded by S&P to BB on continuing high leverage

Doosan Bobcat outlook revised by S&P to negative on weak demand, liquidity pressure

Junk Bonds Bounce Back – Hopeful & Concerning

Corporate debt has rallied and this has enabled riskier companies to raise much-needed cash to weather this downturn. This has raised concerns on whether investors are overly optimistic about the economy. From April 13 through Friday April 24, companies such as Ford Motor Co., AMC Entertainment Holdings Inc. and SeaWorld Entertainment Inc. issued a combined $28 billion of hgh yield bonds, the fourth-largest two-week total on record, according to LCD, a unit of S&P Global Market Intelligence. With social and business activity severely restricted across the US, there is little debate about the near-term hit to the U.S. economy. Investors, though, have tended toward optimism about how quickly the economy can recover, with markets consistently rallying on signs that the spread of the virus is slowing or that potential drug treatments are working. Many economists—and, for that matter, epidemiologists—have been more pessimistic. In their view, the threat from the virus could linger into next year, continuing to depress economic activity and causing bankruptcies and job losses that will further drag on growth.

One cause for concern is an unusually large disconnect between what the market is implying about how many companies will default over the next nine to 12 months and what analysts at ratings firms and Wall Street banks are predicting.

Sources : BNPCitiOthers

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Fitch Downgrades Italy To BBB- With Negative Outlook

Fitch has downgraded Italy’s credit rating to a single notch above “junk”, saying the jump in debt levels resulting from the coronavirus crisis will increase doubts about the sustainability of Rome’s borrowings. The downgrade comes just days after Italy’s reprieve by Standard & Poor’s on Friday, which held its rating at BBB. Fitch joins Moody’s in rating Italian debt at a single notch above junk. Italy would see its bonds thrown out of widely followed indices if two of the three agencies were to strip it of its coveted investment-grade status, forcing some investors to offload the country’s debt. Fitch’s downgrade of Italy does not take proper account of the important economic decisions taken by the European Union and the European Central Bank, the Italian economy minister Roberto Gualtieri said.

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Indonesia Raises Another $4 Billion

Indonesia has raised another Rp 62.62 trillion (US$4.05 billion) from government debt papers (SUN) and is in talks with several development banks to raise another $750 million to finance its widening state budget amid the fight against the coronavirus pandemic. The government has increased this year’s budget financing by raising Rp 1 quadrillion in loans, a 286 percent jump from the original target of Rp 351.9 billion. It will issue nearly Rp 450 trillion worth of “pandemic bonds” and revise up its bond sales target by Rp 160.2 trillion to Rp 549.6 trillion this year to address the widening budget deficit, which could reach 5.07 percent of gross domestic product (GDP).

For the full story, click here


Philippines Sells $2.35 Billion of Bonds

The Philippines raised $2.35 billion in a bond sale, becoming the latest emerging nation to pay up for funds as governments seek to shield their economies from the coronavirus pandemic. The Southeast Asian nation, which is facing its worst deficit ratio in two decades, issued the securities in two parts. The 10-year notes were priced to yield 180 basis points over Treasuries, up from 110 basis points when it sold a similar note in January of last year. The Philippines expects its budget deficit this year to widen to 5.3% of gross domestic product from about 3.6% in 2019.

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China’s Support Measures to Prop Up Growth and Jobs in the Near Term – Moody’s

Moody’s Investors Service says in a new report that China’s (A1 stable) increased fiscal spending and targeted monetary easing will help facilitate a moderate economic recovery in the second half of 2020. Specifically, industrial production will likely return to normal from the second half of 2020, but discretionary consumption will struggle and service sectors that have been hit particularly hard will take longer to return to normal. Meanwhile, the exports sector will remain vulnerable to external headwinds given the ongoing global spread of the virus.

“Although direct fiscal support measures, which at 1.2% of GDP are relatively modest compared to those of other countries, the Chinese government has a number of other ways to support the economy, for example through state-owned entities. As a result, the full extent of support is likely to be significantly higher than direct fiscal support alone would suggest,” says Michael Taylor, a Moody’s Managing Director and APAC Chief Credit Officer.

For the full story, click here


‘Opportunity of a Lifetime’ for Distress Investors in China

Peking University Founder Group, controlled by China’s most prestigious university, was unceremoniously advertised for sale on a national website for failed companies this month. The bankrupt group will meet creditors on April 30. Other once marquee Chinese companies are in talks with holders of their debt as the coronavirus pandemic ravages the world’s second-largest economy. Conglomerate HNA hurriedly convened a meeting with its yuan-denominated bond investors while credit rating agency Moody’s downgraded Shandong Ruyi, the country’s answer to LVMH, to deep junk in March, saying its debt-fuelled acquisition binge on global fashion brands made refinancing of debt due this year doubtful.
Chinese companies’ pain as they grapple with the most dramatic slump in global demand since the Great Depression has created an opening for a small band of investors to provide emergency funds, buy soured loans and hoover up debt at cents on the dollar.

For the full story, click here


Top Gainers & Losers – 29-Apr-20*

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