ASIAN MORNING BUZZ: Nanyang Commercial Bank sparks strong demand for T2 Sub

The primary spotlight was on Chinese offshore issuers in what was another leisurely session in the APAC US$ primary market on Tuesday, as a combination of seasonal factors and a jam-packed week of headline event risk kept activity limited to a couple of RegS only deals on the penultimate session of the month.

Headlining yesterday’s activity was Chinese lender Nanyang Commercial Bank, Limited (Baa1 by Moody’s) which sold its first subordinated tier 2 offering in US dollars in close to five years.

Having held investor calls on Monday, books on the 10NC5 offering opened at initial price guidance (IPG) at T+250a, which sparked an enthusiastic response from yield hungry investors, also keen to seize on the rarity value of what marked only the second Sub Tier 2 issue in the denomination from a Chinese or related territory bank year-to-date.

That said, orders were communicated at >US$4.9bn when final price guidance was announced (incl. US$906m JLM interest + US$130.8m PROP per SFC code). The US$700m 6.00% 10NC5 RegS offering subsequently priced 40bp inside IPG at T+210.

There was also some LGFV paper on the menu yesterday courtesy of unrated Yunnan Communications Investment & Construction Group Co., Ltd that placed a US$200m 6.40% 02-Aug-2026 RegS line at par to yield 6.40%, refined from IPG at 6.90% area.

Those deals nudged weekly issuance volume up to US$1.3bn while monthly issuance volume in July stands at US$24.119bn (incl. Japan) or US$16.619bn without the contribution of Japanese issuers, with today offering the final opportunity to add to those totals.

However, with all eyes on the FOMC meeting outcome later, and particularly the tone of Chairman Powell’s presser for latest clues as to the timing of the first US rate cut, it's reasonable to expect the measured pace of issuance seen in the first two days of the week to continue. That as markets are fully pricing in a 25bp rate cut in September and around 65bp of cuts before year-end.

In the interim, the broader risk market backdrop is fragile in the wake of a mixed session overnight on Wall Street where big tech got hit with more profit taking ahead of more heavyweight sector earnings this week. That as Microsoft was also under pressure after the bell after the tech giant missed cloud growth expectations. The Nasdaq fell by 1.28% while the S&P500 closed 0.50% lower, although the Dow Jones bucked the trend with a 0.50% gain.

US Treasuries enjoyed a more inspiring session ahead of the FOMC outcome later today however, with yields falling across the curve, with moves most pronounced at the short-end and the belly where the 2- and 5-year yields dipped 4.12bp and 4.18bp to 4.359% and 4.033%. Elsewhere, the 10- and 30-year yields closed out 3.5bp and 2.96bp lower at 4.139% and 4.395%.

For a more comprehensive look at Tuesday’s price action and a look ahead to Wednesday’s headline event risk around the globe, see the Asia Breakfast Briefing.

Source: IHS Markit iTraxx & Bloomberg

Snapshot of APAC USD, EUR, CNH, CNY, HKD, SGD, AUD & NZD issues priced on 30th July 2024. Click on the links for the most recent update:

US Credit

Like so many Olympic athletes who have survived the grueling preliminary heats and semifinal matches just to make it to the finish line, high grade issuers may just be as spent after a whirlwind July. With the addition of, what is expected to be the last of the activity in the July primary market – yes, there is one day remaining in the month, but it is “Fed Day” after all – six issuers, who apparently had enough left in the tank, combined to raise $8.7bln in what could be the last hurrah for the month. For more colour see IGM's THE ENDGAME.

European Credit

Single currency bond supply ticked over on Tuesday as two issuers made funding plays in euros, getting in ahead of the looming risk events which include headline central bank verdicts, eurozone CPI data and US payrolls. Leading the way on the day was Lloyds Bank with a EUR1bn 6.25NC5.25 green senior HoldCo, with the lender joined by a EUR600m Jan 2030 line from HY name Crown European Holdings. For full details of Tuesday’s deals, that added to the previous session’s EUR3.25bn of single currency issuance, see the IGM DAILY EUR NICS & BOOKS. For a more comprehensive look at Tuesday's primary session in Europe see IGM's EUROPEAN DAILY CLOSE.

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