*SUMMARY*
Government bond yields higher, stocks lower and credit spreads wider during week
Bullard hawkish comments stirred up volatility as did rumours of imminent Russian invasion in Ukraine next week
Weak sentiment is impacting HY deal flow with 2 deals postponed in Europe
Note, however that Norwegian Cruiseline sold $1.6bn of bonds in the US HY Market this week
Within European Financials there was a non-call (Allianz FFL) and some further uncertainty over when some legacy DNB bonds would be redeemed causing some weakness in disco sector
China easing measures appear to be continuing, benefitting largest, most solvent developers, but idiosyncratic blowups continue, last week - Zhenro Properties
*GLOBAL MACRO*
RATES MOVES / FED SPEAK
Bullard said he supports raising interest rates by a full percentage point by the start of July, sending bond yields much higher
The 2-year UST was up 25bps on Thursday, biggest one-day rise since June 2009
U.S. household debt increased by $1 trillion in 2021, the most since 2007 - RTRS
CDS Indices Closing Levels
IG37 67.3
HY37 105.330
MAIN 66.9
XOVER 326.1
FINSEN 75.8
FINSUB 141.5
WEEKLY FLOWS:
*U.S. INVESTMENT-GRADE FUNDS SEE INFLOWS OF $1.08B: LIPPER
*U.S. HIGH-YIELD FUNDS SEE OUTFLOWS OF $1.96B IN WEEK: LIPPER
*U.S. LOAN FUNDS SEE $2.29B INFLOW IN WEEK TO FEB. 9: LIPPER
Corporate Bonds in Europe Tumble Most Since Pandemic Began - WSJ
Oil: Saudi Aramco raised crude prices for March
OIL - Vitol said oil stocks `worrisome, OPEC+ spare capacity near `alarming' level
*Inflation*
US - Highest headline CPI since 1982
U.K. Salaries Rise Near Record Pace on Inflation Fears and Worker Shortage - BBG
Unilever warned of a hit to profitability this year as it struggles to lift prices enough to offset soaring costs - RTRS
*FINANCIALS*
DNB Bank Discount bonds dropped after earnings call
DNB Discount bonds (Discos) were said to move more than 10pts lower after the Bank said it would leave them outstanding. Seems DNB is taking a different stance to many of the other UK/European Banks that have been actively tendering/calling legacy instruments. This seemed to shake up the discount financials bond sector prices and is likely to see situations being assessed more closely on a bond by bond basis.
Allianz did not call its Fixed For Life 3.875% bond
Bonds moved down around 4pts on the day of non call.
ECB will not extend capital and leverage relief for banks - Link
Banks once again expected to operate above Pillar 2 Guidance from 1 January 2023
Banks to reinclude central bank exposures in leverage ratio from 1 April 2022
Banks have ample headroom above capital and leverage ratio requirements
*CHINA*
Overview: While idiosyncratic situations continue to blow up (e.g Zhenro this week), the general move seems to be towards more easing measures in China. This seems to be helping sentiment around the largest China Developers. Idioysncratic headlines around Evergrande persist, including that of the CEO selling his bond holdings before they halved in price again…
China issued a nationwide regulation to standardize the use of pre-sale funds from housing projects -a move likely to ease the funding pressure for some developers, 21st Century Business Herald reported.
China new bank loans hit record in Jan as cenbank eases policy - RTRS
Jan new loans 3.98 trln yuan vs f'cast 3.69 trln yuan
Jan M2 money supply +9.8% y/y, vs f'cast of +9.2%
Jan TSF 6.17 trln yuan, vs f'cast 5.46 trln yuan
C.bank eases policy to support slowing economy
Read-across to DM markets from China? Iron Ore Miners seem to be on a tear as well as dry bulk shipping
Shipping / Metals experts feel free to correct me in the comments below if you think something else other than China demand is boosting the respective sectors’ share prices.
Chinese Developer Zhenro Plunges 81% on Bond Redemption Concern - RTRS
*ESG*
Copenhagen Pension Fund to divest from Oil & Gas Issuers -BBG
AkademikerPension, which is based north of Copenhagen, says it will dump more than $300 million in fossil-fuel bonds through December. Issuers affected by the decision include Occidental Petroleum Corp., Gazprom PJSC and Petroleos Mexicanos, the $23 billion fund said in an email on Thursday.
“We can see a tendency that fossil fuel bonds, like fossil fuel shares, start to price in stranded asset risks even in the last year with strong performing energy assets,” Anders Schelde, the chief investment officer of AkademikerPension, said in a statement. “We believe this may be the start of new headwinds for these bonds for the years to come.”
BP Says Its Green Transition Won't Spoil Future Profits -- WSJ
*IG*
Weekly EUR IG Issuance Jumps to Highest in Three Weeks - BBG
Anglo American Starts Up New Aquila Met Coal Mine
Toyota cuts output target by half a million more vehicles amid chip crunch
*FINANCIALS*
Good earnings this week that broadly beat equity analyst expectations across a number of UK/European Financials
Credit Agricole, Soc Gen, Beazley, and Zurich were just some of the firms that beat expectations.
*EM*
Philippines is reopening its borders for fully vaccinated travelers
China Seeks to Finance Argentina Projects for $23.7 Billion
Indonesia: economy grew by 5% yoy in Q4, better than estimated and faster than the three months previous.
IMF has not received a request for financial support from Sri Lanka: Rice
Extract of IMF Comment: We have not received a request for financial support from Sri Lanka, from the Government of Sri Lanka. Of course, we stand ready to discuss options if requested and we continue to closely monitor economic and policy developments. On the debt front, I don't have anything in detail to offer you there. As is always the case, we would be looking for all participants to play their part, as appropriate.
Ghana to receive US$1billion support from World Bank - Modern Ghana
World Bank is advancing a policy dialogue as part of due diligence process to provide about US$1 billion financial support in a new country-partnership agreement to Ghana.
The three-to-four-year agreement, which is being presented to the Board of the Bank in February this year for approval, will be intended for specific sectors of the economy such as education, health, and agriculture.
Russia inflation accelerates to the highest level in six years
Ukraine buys back GDP-linked debt as Russia tensions weigh on bonds - Deccan
Citi, Ashmore Catapult Distressed Ukraine Bonds to EM Favorites - BBG
Turkey’s SWF will inject c. US$ 2bn into two state-run lenders to improve their balance sheets
Romania increased its main policy rate by +50bp to +2.50% as expected
India: RBI maintained its key borrowing rate at 4%, as expected
Fitch downgrades Credito Real to RD - Fitch
Russia’s Rosneft’s Highest Ever Annual Profit Paves Way for Record Payout
Ecuador does not expect to seek more foreign debt in 2022 -Lasso | RTRS
Pemex is less likely to get downgraded in 2022: Moody’s Analyst
…thanks to recent government aid, higher crude oil prices and stabilizing production. Moody’s analyst Nymia Almeida said
El Salvador FinMin Zelaya says that there is "zero chance" of defaulting on the US$ 800m bond due Jan 2023
Bahamas - IDB Pledged $59m Bahamas Savings Through Guarantee - Tribune 42
Extract: The Bahamas would save $59m per year via a $200m guarantee from the Inter-American Development Bank (IDB) to underwrite a proposed foreign currency bond issue, it has been asserted. The IDB, detailing plans left by the former Minnis administration, said its guarantee would help mobilise “more than three” times that amount of capital for the Government via a $700m-$850m raise that was originally scheduled to occur in September/October last year.
DNO - Kurdistan/Norway oil firm announces improved debt metrics: Earnings transcript
Highlights:
Net interest bearing debt was cut by 68% last year
DNO exited the year with a net debt of $153m, down from $473 m a year earlier
*HY*
High yield ETF outflows topped $9 billion year to date
2 HY deals postponed in Europe this week: Anacap & Prax Group - BBG
Deals are latest offerings to struggle amid market selloff
AnaCap blames ‘volatile and adverse’ market conditions
Banks led by Credit Suisse were expected to price a 350 million-euro AnaCap bond sale on Thursday. Instead the Luxembourg-based firm canceled the deal, citing “volatile and adverse market conditions,” Meanwhile, U.K energy company Prax called time on a $250 million bond sale, even after sweetening yields to 11%. SRC:BBG
Waldorf Production nears $1 billion deal for ONE-Dyas assets, sources say - RTRS
Waldorf Production is nearing a deal to acquire oil and gas assets in the British and Dutch North Sea from ONE-Dyas for more than $1 billion, industry sources said on Friday.
The planned acquisition by Frontier Airlines of fellow LCC, Spirit, will create the USA’s 5th largest airline - Cirium
Italy's Saipem does not face liquidity risk in short term, S&P says
Saipem in Talks on Bridge Loan for Bonds Due April: Messaggero
American Axle Q4 - reduced its gross debt by approximately $350m and a turn of leverage
Extract of earnings call: From a debt lover's perspective, we ended the year with net debt of $2.6 billion and LTM adjusted EBITDA of $833 million, calculating a net leverage ratio 3.1 times on December 31st. This is a reduction in nearly a full term loan in 2021. In 2021, we prepaid over $350 million of gross debt.
We utilized the free cash flow generating power of AAM, strengthened the balance sheet by reducing our debt and lowering our future interest payments. AAM ended 2021 with total available liquidity of approximately $1.5 billion, consisting of available cash and borrowing capacity on AAM's global credit facilities.
Danaos (Container ships) - EBITDA +91.8% YoY for the quarter
Extract of earnings call: Adjusted EBITDA increased by 91.8% or $76.2 million to $159.2 million in the current quarter from $83 million in the fourth quarter of 2020
Softbank Group redeemed domestic hybrid bonds of ¥455.6 bn in Sep 2021 and domestic subordinated bonds of ¥361.6 bn in Dec 2021 - Earnings
*RATINGS*
Fitch Affirms Spirit Airlines at 'BB-' Following Frontier Merger Announcement; Outlook Stable
Moody's affirms Tullow Oil's ratings; stable outlook
S&PGR Affirms 'B-/B' Ratings On Ghana; Outlook Stable
S&P UPGRADES ANGOLA TO 'B-/B'; OUTLOOK STABLE
*BOND TRADING*
ETP Market Maker Flow Traders reported Q4 Figs - shares closed lower 14.5% on the week
Reuters captured the salient features of the Flow Traders release here. Higher than expected costs seem to disappoint the equity market.
In terms of Fixed Income, Flow Traders has started making markets in single name bonds and became a disclosed market maker for US HY in Q4 2021 on MarketAxess. More details here: Globenewswire
*VAX / COVID*
Protesters against France's vaccine mandates used their vehicles to block roads in Paris this week
US authorities are bracing for a possible protest by truckers
If this were to go ahead, then could cause more issues with the supply chain.