ASIAN MORNING BUZZ: Risk-off tone dampens primary prospects as US tech stocks crash?

The APAC US$ primary market was active on Wednesday courtesy of a brace of high yield and investment grade issuers from India and South Korea which raised a combined US$705m. That edged weekly issuance volume up to US$2.405bn, while the monthly totals in July with and without the contribution of Japanese issuers currently stand at US$21.719bn and US$14.219bn.

Mirae Asset Management (Baa2/BBB/-) paid a reoffer spread of T+145bp to take US$400m out of the market through a 5.500% 31-Jul-2027 senior unsecured RegS only note. We didn t see any book updates during execution although the fact that the spread was tightened by 40bp during bookbuilding from initial price guidance (IPG) at T+185a suggests it was embraced by investors.

In terms of relative value, we saw the issuer s outstanding US$300m 5.875% 26-Jan-2027 line, issued early this year as part of a very well received US$600m dual-tranche 3- and 5-year offering, bid ca. G+139 on Wednesday morning. That indicates that the issuer managed to secure funding ca. flat to fair value this time around.

As a reminder that line priced at T+200 having been revised from a T+235a starting point on a blow out US$3.4bn+ order book at reoffer, equating to a sold cover ratio of 11.33x.

Meanwhile, higher yielding buyers were provided for by Indian renewable energy company SAEL through an inaugural US$305m 7.80% 7NC3 with a WAL of ca. 5.33 years senior secured 144A/RegS Green bond, co-issued by SAEL Limited (SAEL), Sunfree Paschim Renewable Energy Private Limited (SPREPL), SAEL Solar Solutions Private Limited (SSSPL), Jasrasar Green Power Energy Private Limited (JGPEPL), SAEL Kaithal Renewable Energy Private Limited (SKREPL) and Universal Biomass Energy Private Limited (UBEPL).

The exercise priced at par giving a yield of 7.80% which was tightened from initial price guidance at 8.125% area.

Encouragingly, that deal, rated BB+ (stable) by Fitch, marked the second successful debut issue from a high yield Indian borrower on the heels of Monday s US$300m 7.80% 3.5yr (3.375yr WAL) from non-banking financial company Primal Capital & Housing Finance (Ba3/BB-/-). That line landed at a yield of 7.95% having been trimmed from IPG at 8.25% area on the back of >US$1.23bn of orders at reoffer, equating to a healthy cover ratio at 4.10x.

US tech stocks get trashed

Turning to Thursday s primary prospects, which are not looking too amid a very fragile backdrop for broader risk markets.

That as regional traders digest the worst day for US stocks in more than 18 months, after a mixed start to the magnificent seven earnings season rattled confidence in a sector that has powered significant gains this year.

That Nasdaq plunged by a whopping 3.64% yesterday in its worst day since Oct 2022, while a 2.31% slump of the S&P500 marked the bellwether s worst day since Dec 2022. Meanwhile, the Dow Jones fell by 1.25%.

Individual losers included Tesla that fell by over 13% after the electric vehicle maker miss estimates while other big intra-day losers included Alphabet and AI darling Nvidia that sank by ca. 5.5% and 7.3% respectively.

US Treasuries were also on the back foot for the most part led by the long-end where the 10- and 30-year yields jumped by 3.32bp and 5.77bp to 4.284% and 4.542%. The inverted curve flattened as the front-end bucked the trend as 2-year yield dipped 6.06bp to 4.431%.

The US$70bln 5-year note auction was soft, coming in at 4.121% and tailing through the 1:00PM screen bid of 4.110% by 1.1bp, with 96.28% at the stop. The bid/cover ratio was 2.40 versus 2.35 previously and a prior 5-auction average of 2.372.

On the data front, the focus was on US preliminary Manufacturing PMI that dipped into contractionary territory in July at 49.5 from 51.6 and versus an unchanged forecast, while Services rose to 56.0, the highest in two years, from 55.3 prior and expectations at 54.9. The Composite reached 55.0, the highest since April 2022, from 54.8 prior and compared to forecasts at 54.2.

Meanwhile, US June New Home Sales rose to -0.6% m/m from -14.9% prior and versus 3.4% forecast, with the annual pace slowing to 617k versus 621k previously and compared to 640k forecast.

For a more comprehensive look at Wednesday s price action and the drivers behind it along with a look ahead to Thursday s headline event risk across the globe, see IGM s Asia Breakfast Briefing.

Source: IHS Markit iTraxx & Bloomberg

Snapshot of APAC USD, EUR, CNH, CNY, HKD, SGD, AUD & NZD issues priced on 24th July 2024. Click on the links for the most recent update:

US Credit

As mentioned this morning, any additional issuance this month will be icing on the cake since we have already topped all monthly estimates - $95bln was the high - and have already seen the busiest issuance July since $120.33bln priced back in July of 2017. So, we'll take it. The three that did make it to market today, Capital One Financial Corp's $2bln 2-pt offering of fixed-to-floating rate notes, Whistler Pipeline's $1.85bln 4-pt deal a 20yr tranche was added at guidance in response to a reverse inquiry - and Apollo Debt Solutions' upsized $600m 7yr note offering, boosted the week's ex-SSA total by $4.45bln to $31.504bln, topping the average weekly estimate ($30bln) for the twenty-first time this year. For more colour see IGM's THE ENDGAME.

European Credit

The pace was slow once again Wednesday but we did at least see one deal in each of the core currencies, thanks to Schleswig-Holstein (EUR500m 8yr LSA), Severn Trent Water (GBP350m 14yr sustainable) and EDC (USD1bn 4yr global SONIA FRN). All three deals got away without any issues, but the smooth execution is unlikely to tempt many more to market given seasonal factors. At the current juncture the weekly single currency issuance total is at just EUR1bn from two lines and the lowest of any week year-to-date by some distance. For a more comprehensive look at Wednesday's primary session in Europe see IGM's EUROPEAN DAILY CLOSE.

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