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BondEvalue

Bond market data and technology

BondEvalue is a Singapore-based Fintech that specializes in bond market data and technology. The company's information services business offers bond market data on hard-currency corporate & sovereign bonds across Asia, Middle East, Europe and the Americas. The data, which includes bond prices, yields, news and analytics, is offered to end investors via interactive Mobile and Web Apps. Investors can sign up for a free trial of the service either via the company's website (https://bondevalue.com) or by downloading the BondEvalue Mobile App (http://onelink.to/wej7jq). BondEvalue is also developing an electronic bond exchange, BondbloX in Singapore that allows investors to trade bonds electronically in smaller sizes (US$1,000 or equivalent). For more information, visit https://www.bondblox.com/

Bond Market Data and Technology

Credit

Broader stock markets ended lower even as the US labor markets strengthened with weekly jobless claims dropping below 400k for the first time since the pandemic started. The ADP May Employment Report revealed stronger than expected new jobs added of 978k. All eyes are now on the Non-Farm Payrolls numbers for May that will be released later today. The S&amp;P was down 0.4% and Nasdaq was down 1.1% with Consumer Discretionary and IT down 1.2% and 0.9% respectively leading the losses. US 10Y Treasury yields were up 4bp to 1.63%. In Europe, FTSE and CAC were down 0.6% and 0.2% respectively while DAX closed higher by 0.2%. Both, US IG CDS and HY CDS spreads widened 0.8bp and 3.6bp. EU main and crossover spreads also widened 0.7bp and 3.22bp respectively. Asian stocks followed the US markets and are mixed – Nikkei is down 0.4% and Shanghai, Hang Seng are up 0.2% each with Asia ex-Japan CDS spreads widening 1bp.

Putian Launches Tap; Macro; Rating Changes; New Issues; Talking Heads; Top Gainers & Losers

US markets ended flat with the S&amp;P and Nasdaq down ~0.1%. May data was upbeat on US Manufacturing with the ISM Manufacturing PMI registering a 61.2 print vs. 60.7  in April supported by the opening up of the economy. Energy was up 3.9% while health care was down 1.6%. US 10Y Treasury yields were down 1bp to 1.61%. European markets also continued gains as the Markit Eurozone Manufacturing PMI improved to a new high of 63.1  in May on strong economic recovery. DAX was up ~1%, FTSE was up 0.8% and CAC was up ~0.7%. US IG CDS spreads were 0.6bp tighter and HY spreads were 2.8bp tighter. EU main spreads were 0.7bp tighter and crossover spreads tightened 1.6bp. Asian equities are off to another soft start with Nikkei up 0.2%, Hang Seng and Shanghai down 0.2% and 0.4% respectively with Asia ex-Japan CDS spreads widening 0.5bp.

TML, Indonesia, SMC Launch $ Bonds; Macro; Rating Changes; New Issues; Talking Heads; Top Gainers...

Financials Credit Analyst

Hank Calenti, CFA

CreditContinuum

Executive Summary:  A slightly declining US interest rate yield curve aided in driving credit spreads tighter during the month of May while Asia’s bank credit market conditions remained largely positive, despite the recent flare-up in Covid-19 cases across the region. Global market liquidity metrics continued to push investors into risk assets and Asia’s bank debt benefitted from concerns in other parts of the market.Asia’s Tier 2 bonds slightly outperformed Additional Tier 1 (AT1) bonds during May. Both bank debt capital components generated positive total returns during the month. Given five-year effective durations, Asia's AT1 bonds have generated slightly positive total returns year-to-date while Tier 2 notes lag. As with April, Asia’s (x-Japan) US$-denominated bank bond performance diverged by duration during the month of May. Shorter-duration bonds outperformed and, for the most part, longer duration notes underperformed in Option Adjusted Spread terms.Longer duration, high BB rated bonds led spread widening over the month. These bonds were also predominantly Basel III debt capital securities. Unlike in April, there was a mixture of low and high spread bonds amongst underperformers. This suggests greater investor differentiation, via credit fundamentals, in longer duration notes.

Executive Summary:  A slightly declining US interest rate yield curve aided in driving credit spreads tighter during the month of May while Asia’s bank credit market conditions remained largely positive, despite the recent flare-up in Covid-19 cases across the region. Global market liquidity metrics continued to push investors into risk assets and Asia’s bank debt benefitted from concerns in other parts of the market.Asia’s Tier 2 bonds slightly outperformed Additional Tier 1 (AT1) bonds during May. Both bank debt capital components generated positive total returns during the month. Given five-year effective durations, Asia's AT1 bonds have generated slightly positive total returns year-to-date while Tier 2 notes lag. As with April, Asia’s (x-Japan) US$-denominated bank bond performance diverged by duration during the month of May. Shorter-duration bonds outperformed and, for the most part, longer duration notes underperformed in Option Adjusted Spread terms.Longer duration, high BB rated bonds led spread widening over the month. These bonds were also predominantly Basel III debt capital securities. Unlike in April, there was a mixture of low and high spread bonds amongst underperformers. This suggests greater investor differentiation, via credit fundamentals, in longer duration notes.

Bank Credit Compass: Asia Tier 2 and Short Duration Notes Sit in the Sweet Spot

Executive Summary: A liquidity driven melt-up combined with month-end rebalancing to drive bank credit spread performance over the last week. Remove the month-end rebalancing and short duration positioning may remain the best strategy over the next few weeks, absent a material inflection point in the upcoming non-farm payroll numbers. The short end of the rates market continued to push investors up the curve to generate returns. Awash with still rising liquidity, this melt-up was the key driver of credit spread outperformance.Risk asset volatility and talking about, talking about, talking about tapering had little lasting impact on US interest rates over the last few weeks. In fact, rate curve flattening, and falling forward breakeven rates, suggest that the interest rate market may buy the Fed’s assessment of inflation as being transitory.While the transitory mantra is believed, whispers of supply driven growth constraints are being mentioned. This would be interest rate and credit spread positive as it would extend the duration of the recovery and thereby delay late-stage economic cycle repositioning. Although not consensus, this thought is disconcerting, as it suggests the rising rates consensus is very wrong.Therefore, the risk is clearly that the rates market is underpricing the potential for an extended period of higher than anticipated inflation. However, holding cash is expensive. Moving too early to position for higher or longer than anticipated inflation may be career ending. Extending duration to take advantage of declining rates is considered insane. Carry trades remain unloved. Ergo, the silent self-doubtful suffering of the rate and credit markets. Security selection based on fundamental analysis, in so much as one avoids unexpected spread widening, may be the differentiator for outsized total returns over the next few weeks.  We elaborate on these themes within.Market Outlook: The question is whether the over-heating narrative will make a comeback and bring rate and tapering expectations closer. Financial stability risks appear binary from here. Either the Fed is over-accommodative, and it sits on its hands too long while asset bubbles over-inflate so that it gets nasty when it moves, or the Fed gets impatient, and it lowers accommodation unexpectedly which creates a risk off reaction. In both cases, curves flatten in a risk-off environment. We suspect the former is more likely, and for now, the Fed remains the bartender rather than the bouncer.

Executive Summary: A liquidity driven melt-up combined with month-end rebalancing to drive bank credit spread performance over the last week. Remove the month-end rebalancing and short duration positioning may remain the best strategy over the next few weeks, absent a material inflection point in the upcoming non-farm payroll numbers. The short end of the rates market continued to push investors up the curve to generate returns. Awash with still rising liquidity, this melt-up was the key driver of credit spread outperformance.Risk asset volatility and talking about, talking about, talking about tapering had little lasting impact on US interest rates over the last few weeks. In fact, rate curve flattening, and falling forward breakeven rates, suggest that the interest rate market may buy the Fed’s assessment of inflation as being transitory.While the transitory mantra is believed, whispers of supply driven growth constraints are being mentioned. This would be interest rate and credit spread positive as it would extend the duration of the recovery and thereby delay late-stage economic cycle repositioning. Although not consensus, this thought is disconcerting, as it suggests the rising rates consensus is very wrong.Therefore, the risk is clearly that the rates market is underpricing the potential for an extended period of higher than anticipated inflation. However, holding cash is expensive. Moving too early to position for higher or longer than anticipated inflation may be career ending. Extending duration to take advantage of declining rates is considered insane. Carry trades remain unloved. Ergo, the silent self-doubtful suffering of the rate and credit markets. Security selection based on fundamental analysis, in so much as one avoids unexpected spread widening, may be the differentiator for outsized total returns over the next few weeks.  We elaborate on these themes within.Market Outlook: The question is whether the over-heating narrative will make a comeback and bring rate and tapering expectations closer. Financial stability risks appear binary from here. Either the Fed is over-accommodative, and it sits on its hands too long while asset bubbles over-inflate so that it gets nasty when it moves, or the Fed gets impatient, and it lowers accommodation unexpectedly which creates a risk off reaction. In both cases, curves flatten in a risk-off environment. We suspect the former is more likely, and for now, the Fed remains the bartender rather than the bouncer.

Bank Credit Weekly: Month-End Rebalancing Takes Risk-Off Before Take-Off

Executive Summary: Looks can be deceiving when considering performance potential in newly issued securities. While the issuance spread may be wider than peers, this is only one-half of the story. We consider the other half as it relates to <a href="https://www.smartkarma.com/entities/ubs-group-ag-e82c0d58-83f2-4e12-bcb6-976202a4e200" target="_blank" data-smartkarma-citation="entities:27909:1" rel="noopener">UBS (UBSG SW)</a> and <a href="https://www.smartkarma.com/entities/jyske-bank-a-s" target="_blank" data-smartkarma-citation="entities:22404:1" rel="noopener">Jyske Bank's (JYSK DC)</a> recently issued AT1 bonds and we ponder the potential in Oman Arab Bank’s security.

Executive Summary: Looks can be deceiving when considering performance potential in newly issued securities. While the issuance spread may be wider than peers, this is only one-half of the story. We consider the other half as it relates to UBS (UBSG SW) and Jyske Bank's (JYSK DC) recently issued AT1 bonds and we ponder the potential in Oman Arab Bank’s security.  

New Issue Machinations – Looks Can Be Deceiving

Singapore

iShares Barclays USD Asia High Yield Bond Index ETF is an exchange-traded fund incorporated in Singapore. The Fund seeks to track the performance of the Bloomberg Barclays Capital USD Asia High Yield Bond Index.

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Asia High Yield Bond Index (AHYG SP)

Putian Launches Tap; Macro; Rating Changes; New Issues; Talking Heads; Top Gainers & Losers

Broader stock markets ended lower even as the US labor markets strengthened with weekly jobless claims dropping below 400k for the first time since...

BondEvalue

TML, Indonesia, SMC Launch $ Bonds; Macro; Rating Changes; New Issues; Talking Heads; Top Gainers...

US markets ended flat with the S&P and Nasdaq down ~0.1%. May data was upbeat on US Manufacturing with the ISM Manufacturing PMI registering...

BondEvalue

Bank Credit Compass: Asia Tier 2 and Short Duration Notes Sit in the Sweet Spot

Asia’s Tier 2 notes slightly outperformed AT1 in May. Shorter-duration bonds outperformed although there was greater differentiation in longer...

Hank Calenti, CFA

Bank Credit Weekly: Month-End Rebalancing Takes Risk-Off Before Take-Off

Short duration positioning may remain the best strategy over the next few weeks, absent a material inflection point in the upcoming non-farm...

Hank Calenti, CFA

New Issue Machinations – Looks Can Be Deceiving

Looks can be deceiving in newly issued securities. We look behind the headline numbers to assess AT1 performance potential.

Hank Calenti, CFA

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