ASIAN MORNING BUZZ: APAC US$ issuance to remain measured this week?

APAC US$ bond issuers were largely 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 regional supply last week to just US$693m courtesy of six individual Chinese LGFVs, rounded off on Friday by unrated Nanxun Communications Investment Group Co., Ltd which sold a US$200m 6.20% 14-Nov-2027 senior unsecured line at par to yield 6.20%.

Looking ahead to this week's primary prospects, where while its reasonable to expect the market regain a semblance of fluidity, we expect issuance volumes to remain reasonably measured while the dust continues to settle on Donald Trump's Presidential election victory.

US Treasury traders reconsider potential impact of Trump's protectionst policies

That as the funding landscape has become more challenging for some issuers after the 'Trump trade' propelled US Treasury yields to their highest levels in a number of months ahead of the election on expectations that his protectionist policies would put upside pressure on inflation.

Yields have subsequently retreated slightly though as investors have begun to reconsider the impact that Trump's agenda will have.

Indeed, given the president’s track record from his first term, recent fears of inflation from tariffs and deficit spending are perhaps overblown.

A case can be made for a disinflationary Trump agenda resulting from expanded energy production, deregulation, pragmatic tariff and immigration policies, and a streamlined government.

Amid Friday's price action, the 10- and 30-year US Treasury yields declined by 2.14bp and 6.01bp to 4.304% and 4.470% which saw them close out the week 7.93bp and 10.86bp lower than where they started it.

The curve flattened as the short-end bucked that trend however, as a 5.45bp rise for the 2-year yield on Friday to 4.254% saw it close out 4.85bp higher versus a week earlier.

Markets are still clearly choppy, but traders no longer see the Trump trade as a one-way street in bonds. See: Things That Stick Out: Trump Trade Edition

Asian US$ bond spreads hit historical tights while US stocks post best week of 2024

Also encouraging for potential US$ issuers has been a grind tighter of broader Asian US$ bond spreads in the secondary market where regional investment grade spreads hit a new historically tight closing level on Friday.

That is illustrated by the Bloomberg Asia USD IG Bond Index Avg OAS (BAIGOAS) which tightened by 2.45bp on Friday to 70.6bp which is 3.88bp tighter versus the index's closing level the previous Friday (01-Nov-2024).

Its high yield counterpart - Bloomberg Asia USD HY Bond Index Avg OAS (BAYHOAS) - tightened 12.89bp on Friday to close out the week at 430.7, which is 3.25bp tighter week-on-week and the tightest closing level for the HY index since April 2018.

And participants can also take heart from a positive tone on Wall Street to end the week where Trump's victory saw the three bellwether indices all close out at fresh historical highs once again.

The Dow Jones led the way with a 0.59% advance on Friday while the S&P500 posted a gain of 0.38%. That capped a bullish week for the pair which rose by 4.61% and 4.66% in what marked their best week so far this year. The Nasdaq recorded a more modest rise of 0.09% on Friday to close out the week up 5.74% in total, also boasting a new high for the tech heavy index.

Note that here are no domestic data releases nor Fedspeak of note scheduled for Monday where the US will be observing Veteran's Day, although equity markets will continue trading in NY hours (trading in Treasuries will be closed).

Finally, closer to home, Chinese risk assets could be impacted by some benign inflation data released over the weekend, where at 0.30%month/month, China's CPI rose at its slowest pace in four months in October, while Producer Price Delation deepened amid signs that demand remained sluggish and more stimulus measures are needed.

For a more comprehensive look at Friday's price action and a look ahead to Monday's key event risk for global markets see IGM's Asia Breakfast Briefing. And for a comprehensive look at what events global markets will have a close eye on throughout this week, including CPI for October on Wednesday, which is the headline data release in the US this week, see IGM's The Week Ahead.

Snapshot of APAC USD, EUR, CNH, CNY, HKD, SGD, AUD & NZD issues priced on 8th Nov 2024. Click on the links for the most recent updates:

Source: Informa Global Markets (IGM)

Source: IHS Markit iTraxx & Bloomberg

US Credit

While the Street thought we could see, on average, roughly US$2bln in new high-grade supply as investors turned their attention elsewhere to the presidential election and the FOMC policy meeting, even that was a bit of an overestimation, as only one deal, Videotron Ltd’s US$700m 10yr note offering printed during the week. That is until Athene Global Funding announced a US$650m 7yr FA-backed note offering and Oncor Electric Delivery tapped the market for US$550m through a 5yr note on Friday ahead of the long weekend. For a more comprehensive look at last week’s issuance trends in the US primary market see the IG WEEKLY WRAP UP.

European Credit

It will have come to the surprise of very few that the European primary bond market was quiet this (last) week, given the well-flagged distractions elsewhere. In the end just EUR4.75bn priced in the single currency via four issuers (five tranches) across the week, making it the lowest volume euro week since 16-Aug (EUR1bn) when we were in the heart of the traditional August/summer lull. The bulk (EUR3.75bn) of this week’s issuance came on Thursday where two FIG and one IG Corp name made the most of the issuance window that opened quicker than expected following the outcome in the US election. For more details of last week’s EUR supply, see the EUROPEAN DAILY CLOSE.

---- Subscribe to read more ----

To receive this analysis plus much more, subscribe to IGM. Request your free trial of the service today.