APAC CREDIT REVIEW: Chinese LGFVs maintain a pulse in US election week
APAC US$ bond issuers were on the sidelines in the first full week of this month ending 08-Nov-2024 as attention was instead on the outcome of the US election and the FOMC meeting.
That limited supply this week to just US$493m, although that total should at least rise marginally ahead of the weekend thanks to Nanxun Communications Investment Group Co., Ltd which is live with an offshore 3-year line on Friday.
That will round off a week where unrated Chinese LGFVs were responsible for all of this week’s modest issuance volume.
And while regional benchmark issuance is expected to resume next week, we would not expect the floodgates to open as many potential issuers may prefer to see how broader markets continue to react to Trump’s victory moving forward.
Moreover, while US Treasury yields retreated from their post-election highs during Thursday’s session, yields are still around 68bp and 60bp higher than where they were at the beginning of October in the case of 5- and 10-year USTs.
That makes funding conditions notably less accommodating for issuers than they were at that time and for much of Q3 2024 when the month of September 2024 spawned US$37.637bn of regional issuance, the highest monthly total since January 2023.
On a more positive note though, Asian US$ investment grade bond spreads are currently sitting at historically tight levels which could entice some issuers to the market next week.
That is illustrated by the Bloomberg Asia USD IG Bond Index Avg OAS which closed out ca. 73bp on Thursday which is about 1bp tighter compared to a week earlier.
One issuer that is on course to visit the market next week is the People’s Republic of China which today mandated banks to lead-manage a US$2bn (capped) dual-tranche senior unsecured 144A/RegS offering with maturities of 3- and 5-years. The deal is expected to hit the screens as soon as 13th November, subject to market conditions.
For more background see our preview here.
See the APAC NICs & Books Week Ending 8-Nov-2024 spreadsheet for the full pricing evolution of all this week's regional USD/EUR/CNH/AUD/NZD-denominated bond issues complete with new issue concessions, book sizes, cover ratios, and convenient links to IGM relative value analysis and distribution statistics where available.
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