We view high yield bonds as more favourable given below historical average valuations (Figure 3) providing higher buffer against rising interest rates.
Thu, 24 Jun: US: GDP (8:30PM), US: Core PCE (8:30PM)
Fri, 25 Jun: SG: Industrial Production (1:00PM)
Last Week Summary
Hawkish US Federal Reserve comments post last week’s FOMC meeting drove the US Treasury yield curve steepening, as 10yr yields rose as high as 1.59% mid week. Fed Chair Jerome Powell also signaled the scaling back of bond purchases, forecasting 2 rate hikes before end of 2023. Overnight oil futures fell as the US dollar continued to strengthen. Asian primary market sentiment was dampened by the slippage on Wall Street and Treasuries sold off. Only US$2.43bn (from 9 issuers) was issued last week, 74% WoW decline. Average initial price guidance tightening also decreased 2.6bps to 22.8bps.
Chinese property developer China Aoyuan Group tapped the offshore bond market for a US$200mn 3yr bond last week. The weak market sentiment limited momentum for this deal, with the bond eventually pricing at its initial price guidance of 8.25%. Orderbooks were over US$1bn (with US$310mn from lead managers) at final price guidance. The new bonds traded 1.4 points lower the next morning.
Indian IT giant Wipro’s debut dollar bond issuance saw good investor demand last week. The US$750mn A- rated 5yr bond was issued through its wholly owned US-based subsidiary Wipro IT services and priced at T+80bps. Final orderbooks were over 2.5x covered, allowing the deal to tighten 30bps from the initial price guidance. US fund manager investors took the lion’s share of allocation.
2 outstanding mandates remain from last two weeks.
