ASIAN MORNING BUZZ: Dramatic cross-asset price swings pre-FOMC on Trump win

Little surprise that the APAC US$ primary market was devoid of activity on Wednesday, as participants watched the US election results trickle through and the subsequent victory for Donald Trump in what was possibly the most remarkable comeback in US political history.

That keeps regional weekly and monthly supply in November at US$400m courtesy of a brace of Chinese LGFVs.

And we are not anticipating any benchmark US$ supply from APAC issuers at least until after the US Veteran’s Day holiday next Monday (11^th Nov), as the dust continues to settle on a Trump win and attention also turns to the FOMC outcome later Thursday, where a 25bp rate cut is pretty much nailed on. That is of course unless we see another Chinese LGFV raise offshore funding in the interim.

That after APAC US$ issuance volume dropped considerably to US$22.26bn in October 2024 from US$37.137bn in the previous month of September, which marked the highest monthly issuance volume since January 2023. That as regional issuers were forced to navigate their way through higher US Treasury yields in October as future rate cut projections were scaled back.

Chinese issuers took 37% of total volume last month, while APAC high yield supply increased to its highest level since April 2022 despite the overall decline in volume, underpinned by a slew of Indian names.

For the full report of October’s primary market issuance trends across APAC, Europe and the US, with insights from our analysts around the globe, please see IGM's Global Credit Snapshot - October 2024.

US stocks, the dollar and UST yields surge while Asian USD spreads post tightest levels ever as markets digest Trump’s success

Expectations of pro-growth policies including deregulation and a reduction in taxes following Trump’s victory drove US stocks sharply higher on Wednesday, where gains of 3.57% for the Dow Jones, 2.95% for the Nasdaq and 2.53% for the S&P500 propelled the three major indices to new historical highs.

That was in contrast to a challenging session for Chinese stocks yesterday, led by a 2.23% slump of the Hang Seng amid concerns surrounding the prospect of more trade tariffs and the impact on economic growth posed by a Trump victory.

And as US stocks rallied hard so an acceleration of the ‘Trump trade’ thrust US Treasury yields sharply higher yesterday.

The curve bear steepened with the move most dramatic at the long-end where the 10- and 30-year yields spiked by 16.07bp and 17.45bp to 4.432% and 4.610%, while the 2- and 5-year yields advanced by 8.52bp and 12.49bp at 4.262% and 4.274% respectively.

The $25bln 30-year bond auction was strong, coming in at 4.608%, the highest since May, stopping through the 1:00PM screen bid of 4.640% by 3.2bps, with 13.02% at the stop. The bid/cover was 2.64, the highest since December 2014, versus 2.50 at the last auction and a prior 5-auction average of 2.40.

Elsewhere, the US dollar had its best day in close to two years on Wednesday as the DXY recovered the 105 handle, while Bitcoin posted a new high above 75k.

Finally, it was also a solid session in the broader Asiadollar cash credit market where investment grade bond spreads hit a new historically tight closing level as illustrated by the Bloomberg Asia USD IG Bond Index Avg OAS (BAIGOAS), which tightened by 2.26bp yesterday to 73bp.

For a more comprehensive look at Wednesday’s post election price action and a look ahead to Thursday’s headline event risk, including the outcome of the FOMC meeting, see IGM’s Asia Breakfast Briefing.

US Credit

In the 1950s, during the heyday of the Brooklyn Dodgers, fondly referred to as the Brooklyn Bums, their mantra was “Wait till next year!” Well, when it comes to the investment grade new issue market, the mantra is, “Wait till next week!” While we may not see another high-grade corporate bond deal this week – there has only been one, Videotron Ltd’s $700m 10yr note offering priced on Monday and today marked the twentieth "zero" ex-SSA issuance day of the year, and yes, this week will be the slowest week of the year – next week could be quite a different story, at least according to the syndicate desks we spoke with today. Now that the question of who will lead the government for the next four years has been answered, corporate borrowers may return to the market next week with a vengeance. For more colour see IGM's THE ENDGAME.

Europe Credit

As per expectations there was no activity at all in European capital markets in the wake of the US election results. That means, so far this week, we have seen just EUR1bn of issuance with that coming from French covered bond issuer BPCE SFH in the shape of a new 6yr line. In sterling, a GBP250m 3yr from German regional issuer Land NRW (no books and priced in line with IPTs) on Monday was joined yesterday by Northern Gas which took the opportunity to offload GBP150m of retained bonds. With the election outcome seemingly sorted the issuance window is theoretically back open, albeit with BoE and FOMC decisions to contend with tomorrow (Thurs). For a more comprehensive look at Wednesdsay's primary session in Europe see IGM's EUROPEAN DAILY CLOSE.

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