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ASIAN MORNING BUZZ: Front loaded week in primary ahead of event risk?

A respectable start to the week in the APAC primary US$ market saw a mixed bag of regional issuers raise a combined US$3.3bn of senior unsecured fixed and floating rate supply in the 3-year part of the curve, which appeared to generate a decent response from investors, based on the information available at the time of writing.

That maintains a recent trend which has largely seen plenty of investor cash being put to work in the primary market, although demand has not always been spread evenly and selective investors have pushed back against some issues on the more aggressive side of pricing.

That has been evident by price sensitivity in some order books by varying degrees, a scenario which has probably been accentuated by a recent uptick in issuance volume.

Standing out in terms of deal size yesterday was the dual-tranche US$2bn senior unsecured fixed and floating rate offering from Australia and New Zealand Banking Group Limited (Aa2/AA-/AA-), which comprised US$750m 4.90% 16-Jul-2027 and US$1.25bn SOFR+68 16-Jul-2027 lines.

The two tranches landed at a reoffer spread of T+50 and a DM at SOFR+68, having been refined from initial price thoughts at T+75a and SOFR equivalent respectively.

That was supported by orders of ca. US$2.05bn of the fixed rate portion and US$4.2bn on the floater, equating to cover ratios of 2.73x and 3.36x. That in turn allowed ANZ to lock-in competitive funding at around flat to its existing curve on the fixed rate tranche.

The fixed rate tranche also priced at a modest premium of ca. 1bp versus the US$900m 5.087% 11-Jun-2027 line sold last month by peer National Australia Bank (Aa2/AA-/AA-) that also provided a pricing point of reference at ca. G+49.

That, coupled with yesterday's US$1bn 5.00% 15-Jul-2027 line from Kraton Corporation (guaranteed by KDB) and the second ethical 3-year floating rate note in as many weeks from China Merchants Bank Co., Ltd (US$300m SOFR+54 15-Jul-2027), nudged monthly issuance volume in July up to US$10.51bn, or US$6.01bn when stripping out the contribution of Japanese names.

And another accommodating back drop in broader markets bodes well for an active primary market session on Tuesday, as issuers may attempt to front load the week ahead of Thursday's US inflation data and the start of the Q2 earnings season.

The latter kicks-off in earnest on Friday thanks to US financial big hitters Citigroup, Wells Fargo and JP Morgan Chase.

Quiet sideways session in US but stocks hit fresh highs

That as price action in US markets was fairly contained overnight, as participants also opted to keep their powder dry ahead of Fed Chairman Powell's appearance before Congress later today and on Wednesday.

US Treasury yields were mixed with moves most pronounced at the front and ultra long-end of the curve, where the 2-year nudged 2.5bp higher at 4.629%, while the 30-year dipped 1.22bp at 4.465%.

That as cooler expectations for inflation in the year ahead from a NY Fed report failed to impress traders, after a closer examination of the survey's cross tabs revealed higher outlooks for food, gas, medical, college, and rent ranging from 4%-7%.

Overseas markets also provided little impetus as the dust continues to settle on the left-wing swing in recent UK and French elections.

Elsewhere, US stocks eked out some minor gains overall, where a moderate 0.28% and 0.10% tech driven advance of the Nasdaq and S&P500 was sufficient to push the bellwether indices to fresh historical highs.

The Dow Jones lagged the move though with a small 0.08% decline.

In other markets, Bitcoin was under pressure again as the historical correlation with stocks has disintegrated. Although it has received little attention so far, IGM analysts believe there's a larger macro message here, as nominal GDP (as per the Atlanta Fed tracker) drops below the Fed's policy rate, posing a threat to risk assets as financial conditions tighten. See: Things That Stick Out: Crypto Edition

Meanwhile, for a more comprehensive look at Monday's price action and a look ahead to Tuesday's headline event risk see the Asia Breakfast Briefing.

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