Financials Credit Analyst

Hank Calenti, CFA

CreditContinuum

Credit

Executive Summary: Friday’s jobs report shocker capped off a week which included US Treasury Secretary Janet Yellen needing to be Mirandized. This was followed by the Fed stating the obvious in its financial stability report. Unmentioned in this report is that the role of this Fed is no longer to take away the punchbowl, but instead it is the bartender. The week ended with a jobs report that was the biggest miss in nominal terms, ever.The report was at odds with recent PMI surveys in which respondents stated that it was difficult to hire. This may be the result of frictions in hiring as unemployment benefits as well as child-care needs and postponed school re-openings delay employee re-entry. The truth serum for the US economy may occur around September when extended unemployment payments expire.The market impact was an immediate 10 basis point (bp) drop in the 10-year Treasury while the 2-year note even fell 1bp. Prices on the 10-year gave up these gains as the day progressed, but the smart money, that is the bond market, may be correct with the recent dampening of interest rates suggesting a longer time period to a less accommodative Fed.  The US Treasury bond curve ended the week flatter with short-end yields falling by much less than the longer part of the curve.With rates continuing to push credit spreads, Asia- and European-headquartered banks generated negative total returns in all but the lowest duration notes. There was a clear preference for Additional Tier 1 (AT1) bond issuance over the past week while over US$11 billion equivalent was raised by financial institutions globally in USD and Euros. In what may have been the busiest AT1 bond issuance weeks of the year, five institutions brought over US$6.5 billion in six securities.Nonetheless, this is a great credit environment and spreads which could go even tighter into year-end. A single piece of data, such as April’s non-farm payroll figure, is unlikely to change investor positioning. It may be a little too early to fade the market as fundamentals catch-up.Next week we will get a record-matching $126 billion slate of Treasury auctions. We may also see a robust serving of corporate and financials debt issuance. US consumer-price data is set to be published on Tuesday, 12 May. A sharp annual acceleration is forecast, although the market is likely to dismiss the figure as resulting from a comparison to depressed levels of a year earlier.With peak Q1 earnings season now behind us, Japanese banks will deliver their year-end results over the next week while several other stragglers pepper the remainder of the month. US banks signaled that they anticipate significantly higher interest rates by raising record breaking amounts in the debt capital markets following their Q1 earnings announcements. Other banks may follow with material debt issuance over the next few weeks after reporting earnings.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.

Executive Summary: Friday’s jobs report shocker capped off a week which included US Treasury Secretary Janet Yellen needing to be Mirandized. This was followed by the Fed stating the obvious in its financial stability report. Unmentioned in this report is that the role of this Fed is no longer to take away the punchbowl, but instead it is the bartender. The week ended with a jobs report that was the biggest miss in nominal terms, ever.The report was at odds with recent PMI surveys in which respondents stated that it was difficult to hire. This may be the result of frictions in hiring as unemployment benefits as well as child-care needs and postponed school re-openings delay employee re-entry. The truth serum for the US economy may occur around September when extended unemployment payments expire.The market impact was an immediate 10 basis point (bp) drop in the 10-year Treasury while the 2-year note even fell 1bp. Prices on the 10-year gave up these gains as the day progressed, but the smart money, that is the bond market, may be correct with the recent dampening of interest rates suggesting a longer time period to a less accommodative Fed.  The US Treasury bond curve ended the week flatter with short-end yields falling by much less than the longer part of the curve.With rates continuing to push credit spreads, Asia- and European-headquartered banks generated negative total returns in all but the lowest duration notes. There was a clear preference for Additional Tier 1 (AT1) bond issuance over the past week while over US$11 billion equivalent was raised by financial institutions globally in USD and Euros. In what may have been the busiest AT1 bond issuance weeks of the year, five institutions brought over US$6.5 billion in six securities.Nonetheless, this is a great credit environment and spreads which could go even tighter into year-end. A single piece of data, such as April’s non-farm payroll figure, is unlikely to change investor positioning. It may be a little too early to fade the market as fundamentals catch-up.Next week we will get a record-matching $126 billion slate of Treasury auctions. We may also see a robust serving of corporate and financials debt issuance. US consumer-price data is set to be published on Tuesday, 12 May. A sharp annual acceleration is forecast, although the market is likely to dismiss the figure as resulting from a comparison to depressed levels of a year earlier.With peak Q1 earnings season now behind us, Japanese banks will deliver their year-end results over the next week while several other stragglers pepper the remainder of the month. US banks signaled that they anticipate significantly higher interest rates by raising record breaking amounts in the debt capital markets following their Q1 earnings announcements. Other banks may follow with material debt issuance over the next few weeks after reporting earnings.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.

Bank Credit Weekly: Jobs Report Shocker Flattens Curves

Executive Summary:  A flattening US interest rate yield curve changed the dynamics for credit investors for most of the month of April, in complete contrast to how interest rates behaved in March. The narrative changed to one that was Treasury bond supportive, and this supported shorter-duration securities. Meanwhile yield curve flattening pushed credit spreads in the opposite direction longer out the curve.The sweet spot for total return investors moved dramatically. Investors that were positioned in higher duration bonds witnessed underperformance on a total return basis. Meanwhile, investors in lower duration bonds outperformed on a total return basis. However, as the month ended, we began to witness a return of the reflation trade with US interest rates ending the month on an upswing. May could see a repeat of March’s carry-trade performance.From a pure credit spread perspective, ignoring movements in the risk-free rate, Asia’s bank bonds had a mixed performance with one-third of the +100 bonds that we track widening during the month. Vaccine versus virus concerns led to lower economic growth projections by the market than seen in the prior month. Expectations for an unsynchronized global recovery also factored. Taken together, this would delay the much needed catch-up in credit fundamentals to match the monetary accommodation driven spread compression over the last year. As such, bond spread tightening was less ebullient while widening lessened the amount of fundamental performance needed to justify lofty spread levels.

Executive Summary:  A flattening US interest rate yield curve changed the dynamics for credit investors for most of the month of April, in complete contrast to how interest rates behaved in March. The narrative changed to one that was Treasury bond supportive, and this supported shorter-duration securities. Meanwhile yield curve flattening pushed credit spreads in the opposite direction longer out the curve.The sweet spot for total return investors moved dramatically. Investors that were positioned in higher duration bonds witnessed underperformance on a total return basis. Meanwhile, investors in lower duration bonds outperformed on a total return basis. However, as the month ended, we began to witness a return of the reflation trade with US interest rates ending the month on an upswing. May could see a repeat of March’s carry-trade performance.From a pure credit spread perspective, ignoring movements in the risk-free rate, Asia’s bank bonds had a mixed performance with one-third of the +100 bonds that we track widening during the month. Vaccine versus virus concerns led to lower economic growth projections by the market than seen in the prior month. Expectations for an unsynchronized global recovery also factored. Taken together, this would delay the much needed catch-up in credit fundamentals to match the monetary accommodation driven spread compression over the last year. As such, bond spread tightening was less ebullient while widening lessened the amount of fundamental performance needed to justify lofty spread levels.

Bank Credit Compass: Total Return Sweet Spot Moves, but May Rebound

Stronger than expected US employment data combined with uncertainty surrounding the Fed’s next steps to drive broader credit markets wider by weekend, although financials remained better bid. Taperless tantrums may be repeated over the near term but financials may be less impacted.While US CCC-rated bonds and Asia High Yield sold-off, almost all European contingent capital and Asia High Yield bonds tightened in credit spread terms as investors remained anchored to banks as an economic recovery play. Investors grabbed longer duration Additional Tier 1 (AT1) bonds as the week progressed, on economic strength expectations, while lower duration Senior Unsecured bonds outperformed on rising interest rate expectations. Friday’s non-farm report generated concerns on European growth in a rising rate environment. Queue central bank assurances that they will respond to rising rates over the next few weeks.Despite higher spreads available in more moderate duration AT1 notes, Europe's outperformers were almost exclusively long duration bonds. This outperformance is a very bullish signal. However, we are not convinced that this should apply to each of these institutions.  Please see <a href="https://www.smartkarma.com/insights/credit-suisse-greensill-sows-reputation-risks-underweight-cs-bonds" target="_blank" data-smartkarma-citation="insights:48839" rel="noopener">Credit Suisse: Greensill Sows Reputation Risks, Underweight CS Bonds</a> for further details.Financials remain the sweet spot in Asia credit. Levered to the economy and rising rates, this is the place to be at this point in the market cycle.  Performance attributes varied amongst the various bank credit classes in Asia. Risk-on sentiment drove higher risk AT1 and less subordinated Tier 2 bonds tighter. Meanwhile duration concerns drove investors to target higher spreads per unit of duration in BBB-rated and High Yield Senior Unsecured notes. Taken together, this performance outcome is likely evidence of the melt-up in spreads that we anticipated several weeks ago. Please see <a href="https://www.smartkarma.com/insights/bank-credit-strategy-melt-up-before-meltdown-where-to-position" target="_blank" data-smartkarma-citation="insights:48133" rel="noopener">Bank Credit Strategy: Melt-Up Before Meltdown, Where to Position</a> for more details.Admittedly, however, we are surprised by the credit strength of Asia-headquartered financials during the global rates rout. We attribute this to two items. First, China is further along the Covid-19 curve in recovery and will clearly benefit as the rest of the world catches-up. Second, financials are a leverage play on the global recovery. Taken together, Asia financials overall are well placed to continue outperforming other markets over the near term.Market Outlook: The Fed will likely Twist before it Tapers, but the timing of both remain uncertain as real long term interest rates remain negative. In the interim, global treasury markets may remain unsettled. The US economy may run very hot before we see a change in Fed policy regarding short-term interest rates and the US dollar should remain stronger than analysts forecasted at year-end. Broadly, this is not Emerging Market IEM) friendly; however, a strong US economic rebound should benefit EM and European financials. Short duration in investment grade financials combined with high credit spreads in High Yield financials and more subordinated debt may remain the way forward.

Stronger than expected US employment data combined with uncertainty surrounding the Fed’s next steps to drive broader credit markets wider by weekend, although financials remained better bid. Taperless tantrums may be repeated over the near term but financials may be less impacted.While US CCC-rated bonds and Asia High Yield sold-off, almost all European contingent capital and Asia High Yield bonds tightened in credit spread terms as investors remained anchored to banks as an economic recovery play. Investors grabbed longer duration Additional Tier 1 (AT1) bonds as the week progressed, on economic strength expectations, while lower duration Senior Unsecured bonds outperformed on rising interest rate expectations. Friday’s non-farm report generated concerns on European growth in a rising rate environment. Queue central bank assurances that they will respond to rising rates over the next few weeks.Despite higher spreads available in more moderate duration AT1 notes, Europe's outperformers were almost exclusively long duration bonds. This outperformance is a very bullish signal. However, we are not convinced that this should apply to each of these institutions.  Please see Credit Suisse: Greensill Sows Reputation Risks, Underweight CS Bonds for further details.Financials remain the sweet spot in Asia credit. Levered to the economy and rising rates, this is the place to be at this point in the market cycle.  Performance attributes varied amongst the various bank credit classes in Asia. Risk-on sentiment drove higher risk AT1 and less subordinated Tier 2 bonds tighter. Meanwhile duration concerns drove investors to target higher spreads per unit of duration in BBB-rated and High Yield Senior Unsecured notes. Taken together, this performance outcome is likely evidence of the melt-up in spreads that we anticipated several weeks ago. Please see Bank Credit Strategy: Melt-Up Before Meltdown, Where to Position for more details.Admittedly, however, we are surprised by the credit strength of Asia-headquartered financials during the global rates rout. We attribute this to two items. First, China is further along the Covid-19 curve in recovery and will clearly benefit as the rest of the world catches-up. Second, financials are a leverage play on the global recovery. Taken together, Asia financials overall are well placed to continue outperforming other markets over the near term.Market Outlook: The Fed will likely Twist before it Tapers, but the timing of both remain uncertain as real long term interest rates remain negative. In the interim, global treasury markets may remain unsettled. The US economy may run very hot before we see a change in Fed policy regarding short-term interest rates and the US dollar should remain stronger than analysts forecasted at year-end. Broadly, this is not Emerging Market IEM) friendly; however, a strong US economic rebound should benefit EM and European financials. Short duration in investment grade financials combined with high credit spreads in High Yield financials and more subordinated debt may remain the way forward.

Bank Credit Weekly: One Size Does Not Fit All

Asia headquartered banks fared well despite the global tantrum without taper in the Treasury markets. Asia headquartered bond prices fell by less than their benchmark Treasury market notes, resulting in a bout of credit outperformance. Almost all bonds tightened in credit spread terms as investors remained anchored to banks as an economic recovery play. Moderate duration, lower risk, bonds continued to outperform, although there were pockets of outperformance in China-headquartered Additional Tier 1 bonds.Bonds in the belly of the curve, that is those maturing or callable in five-years, outperformed longer dated notes. Moderate duration bonds led as investors lost faith in an inflation free economic recovery which would cap market rate rises. This is the opposite of last weeks’ performance, wherein even longer-duration note outperformed. That seemed odd given policymakers repeated statements that they would let the US economy run hot at the risk of stoking inflation. The rapid sell-off in US Treasuries during the week is evidence of market jitters regarding eventual inflation expectations.The pressure on U.S. Treasuries is largely in-line with what we have been cautioning on since the Senate run-off results in Georgia last month. Friday’s correction at the long end may be tested again.Admittedly, however, we are surprised by the credit strength of Asia-headquartered financials during the global rates rout. We attribute this to two items. First, China is further along the Covid-19 curve in recovery and will clearly benefit as the rest of the world catches-up. Second, financials are a leverage play on the global recovery. Taken together, Asia financials overall are well placed to continue outperforming other markets over the near term.Given the rate of change over the last two weeks, things are moving fast. We identify potential opportunities within. <a href="https://www.smartkarma.com/entities/state-bank-of-india" target="_blank" data-smartkarma-citation="entities:160:1" rel="noopener">State Bank of India (SBIN IN)</a> represents one credit curve where better opportunities exist in shorter duration bonds, however, <a href="https://www.smartkarma.com/entities/bank-mandiri-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:441:1" rel="noopener">Bank Mandiri (BMRI IJ)</a> may offer even better values, as we note within.Market Outlook: This week’s Treasury market tantrum was not induced by Fed tapering, but it is a reminder of what it may look like when the Fed does dial back its asset purchases. Combined with the strength of the risk-on moves, this makes us uneasy. Financial repression creates a market, which in its nature, is always a one-sided bet with the Fed / ECB/ BOJ.  There is limited price discover as the market is simply sentiment driven. Credit value should remain driven by larger market forces. However, we may be fast approaching a point where the market outpaces the rate of expected economic recovery, and / or the market outpaces the rate that can be achieved without incurring substantial financial stability concerns. Our preference is for lower duration bonds, preferably in the belly of the curve. Please see our recent <a href="https://www.smartkarma.com/insights/bank-macro-manifest-risk-rally-gathers-steam-as-bad-news-more-stimulus" target="_blank" rel="noopener">Bank Macro Manifest</a> and <a href="https://www.smartkarma.com/insights/bank-credit-strategy-melt-up-before-meltdown-where-to-position" target="_blank" rel="noopener">Bank Credit Strategy</a> notes for more details.

Asia headquartered banks fared well despite the global tantrum without taper in the Treasury markets. Asia headquartered bond prices fell by less than their benchmark Treasury market notes, resulting in a bout of credit outperformance. Almost all bonds tightened in credit spread terms as investors remained anchored to banks as an economic recovery play. Moderate duration, lower risk, bonds continued to outperform, although there were pockets of outperformance in China-headquartered Additional Tier 1 bonds.Bonds in the belly of the curve, that is those maturing or callable in five-years, outperformed longer dated notes. Moderate duration bonds led as investors lost faith in an inflation free economic recovery which would cap market rate rises. This is the opposite of last weeks’ performance, wherein even longer-duration note outperformed. That seemed odd given policymakers repeated statements that they would let the US economy run hot at the risk of stoking inflation. The rapid sell-off in US Treasuries during the week is evidence of market jitters regarding eventual inflation expectations.The pressure on U.S. Treasuries is largely in-line with what we have been cautioning on since the Senate run-off results in Georgia last month. Friday’s correction at the long end may be tested again.Admittedly, however, we are surprised by the credit strength of Asia-headquartered financials during the global rates rout. We attribute this to two items. First, China is further along the Covid-19 curve in recovery and will clearly benefit as the rest of the world catches-up. Second, financials are a leverage play on the global recovery. Taken together, Asia financials overall are well placed to continue outperforming other markets over the near term.Given the rate of change over the last two weeks, things are moving fast. We identify potential opportunities within. State Bank of India (SBIN IN) represents one credit curve where better opportunities exist in shorter duration bonds, however, Bank Mandiri (BMRI IJ) may offer even better values, as we note within.Market Outlook: This week’s Treasury market tantrum was not induced by Fed tapering, but it is a reminder of what it may look like when the Fed does dial back its asset purchases. Combined with the strength of the risk-on moves, this makes us uneasy. Financial repression creates a market, which in its nature, is always a one-sided bet with the Fed / ECB/ BOJ.  There is limited price discover as the market is simply sentiment driven. Credit value should remain driven by larger market forces. However, we may be fast approaching a point where the market outpaces the rate of expected economic recovery, and / or the market outpaces the rate that can be achieved without incurring substantial financial stability concerns. Our preference is for lower duration bonds, preferably in the belly of the curve. Please see our recent Bank Macro Manifest and Bank Credit Strategy notes for more details.

Bank Credit Weekly: Asia Credit Outperforms Despite Treasury Tantrum

Credit risk markets remained decoupled between the US and Asia as spreads on US Caa-rated entities continued to defy gravity. The risk-on wave continued to swell through US risk asses on additional positive vaccine news. Combined with a Goldilocks election outcome whereby President Trump loses the election, but Joe Biden does not win a mandate, spreads on the US Caa-rated complex tightened to inside Asia’s HY index for the first time since 2014. Is it time to sell the Caa bull market?  Treasury Secretary Mnuchin’s decision to cancel several underutilized emergency Fed programs at the end of the year may raise expectations for the Fed to expand its asset purchase program or target its purchases more directly along the Treasury curve at its December meeting. We are set-up for disappointment.  Against this background, Asia’s HY Additional Tier 1 underperformed Subordinated and Senior Unsecured securities as near-term global growth concerns outweighed vaccine progress. Most of the underperforming bond were issued over the last three months. This suggests these may have been issued at the top of the market, in spread terms. Amongst Additional Tier 1 bonds, Hong Kong-headquartered banks led advances. <a href="https://www.smartkarma.com/entities/bank-of-east-asia-ltd" target="_blank" data-smartkarma-citation="entities:341:1" rel="noopener">Bank of East Asia's (23 HK)</a> announcement that it would call its 5.5% coupon December-callable AT1 bond aided sentiment. We first recommended that investors overweight this security in mid-February within <a href="https://www.smartkarma.com/insights/bank-of-east-asia-overweight-short-call-at1-on-refinancing-ability" target="_blank" data-smartkarma-citation="insights:36787" rel="noopener">Bank of East Asia: Overweight Short-Call AT1 on Refinancing Ability</a> and recently re-iterated this call within <a href="https://www.smartkarma.com/insights/bank-of-east-asia-buy-the-inefficient-capital-securities" target="_blank" data-smartkarma-citation="insights:42753" rel="noopener">Bank of East Asia: Buy the Inefficient Capital Securities</a>. Victory lap over.Concurrently, Turkish HY Senior Unsecured bank bonds again materially outperformed their global peers following delivery of a more orthodox monetary policy regime. Nonetheless, Turkish bank bonds continue to trade wide of similarly rated entities in other emerging markets.  Given the starting point for a potential Turkish bank bond rally, we anticipate a virus versus vaccine market immunity in Turkish-bank bonds returns over the near term.   Over US$13 billion was raised by financial institutions in USD, Euros and Sterling across the credit continuum. Amongst higher-yield issued securities, the UK Co-operative Bank’s Caa1 rated bond makes India’s <a href="https://www.smartkarma.com/entities/iifl-holdings-ltd" target="_blank" data-smartkarma-citation="entities:20197:1" rel="noopener">IIFL Finance's (IIFL IN)</a> US$-bond look cheap in comparison. However, unlike India where every bank rescue requires a liability moratorium, the Co-operative Bank resolution three years ago was not damaging to the financial system. India’s rescue of <a href="https://www.smartkarma.com/entities/lakshmi-vilas-bank-ltd" target="_blank" data-smartkarma-citation="entities:17552:1" rel="noopener">Lakshmi Vilas Bank (LVB IN)</a> this week is no exception. For our views on this please see: <a href="https://www.smartkarma.com/insights/lakshmi-vilas-bank-dbs-rescue-is-a-wasted-option" target="_blank" data-smartkarma-citation="insights:45471" rel="noopener">Lakshmi Vilas Bank: DBS Rescue Is a Wasted Option</a>.US$-debt issuance should be slowed by the upcoming US holiday on Thursday. We could see a short-lived resurgence in early December and then drift sideways until heavy issuance re-emerges in January.Market Outlook: Over the near term, tension between longer-term optimism from vaccine driven economies and the shorter-term reality of increasing Coronavirus lockdowns are likely to weigh on the market in the coming weeks. Positive vaccine news combined with a goldilocks US election outcome lowers the likelihood of excessive US federal stimulus. This should cap additional upward pressure on US Treasury yields until vision increases on likely H2 ’21 US economic growth, post-vaccine distribution. Reflation remains on hold. This could limit US dollar weakness and limit positive impacts on reflationary beneficiaries such as bank valuations and Emerging Markets (EM) assets.

Credit risk markets remained decoupled between the US and Asia as spreads on US Caa-rated entities continued to defy gravity. The risk-on wave continued to swell through US risk asses on additional positive vaccine news. Combined with a Goldilocks election outcome whereby President Trump loses the election, but Joe Biden does not win a mandate, spreads on the US Caa-rated complex tightened to inside Asia’s HY index for the first time since 2014. Is it time to sell the Caa bull market?  Treasury Secretary Mnuchin’s decision to cancel several underutilized emergency Fed programs at the end of the year may raise expectations for the Fed to expand its asset purchase program or target its purchases more directly along the Treasury curve at its December meeting. We are set-up for disappointment.  Against this background, Asia’s HY Additional Tier 1 underperformed Subordinated and Senior Unsecured securities as near-term global growth concerns outweighed vaccine progress. Most of the underperforming bond were issued over the last three months. This suggests these may have been issued at the top of the market, in spread terms. Amongst Additional Tier 1 bonds, Hong Kong-headquartered banks led advances. Bank of East Asia's (23 HK) announcement that it would call its 5.5% coupon December-callable AT1 bond aided sentiment. We first recommended that investors overweight this security in mid-February within Bank of East Asia: Overweight Short-Call AT1 on Refinancing Ability and recently re-iterated this call within Bank of East Asia: Buy the Inefficient Capital Securities. Victory lap over.Concurrently, Turkish HY Senior Unsecured bank bonds again materially outperformed their global peers following delivery of a more orthodox monetary policy regime. Nonetheless, Turkish bank bonds continue to trade wide of similarly rated entities in other emerging markets.  Given the starting point for a potential Turkish bank bond rally, we anticipate a virus versus vaccine market immunity in Turkish-bank bonds returns over the near term.   Over US$13 billion was raised by financial institutions in USD, Euros and Sterling across the credit continuum. Amongst higher-yield issued securities, the UK Co-operative Bank’s Caa1 rated bond makes India’s IIFL Finance's (IIFL IN) US$-bond look cheap in comparison. However, unlike India where every bank rescue requires a liability moratorium, the Co-operative Bank resolution three years ago was not damaging to the financial system. India’s rescue of Lakshmi Vilas Bank (LVB IN) this week is no exception. For our views on this please see: Lakshmi Vilas Bank: DBS Rescue Is a Wasted Option.US$-debt issuance should be slowed by the upcoming US holiday on Thursday. We could see a short-lived resurgence in early December and then drift sideways until heavy issuance re-emerges in January.Market Outlook: Over the near term, tension between longer-term optimism from vaccine driven economies and the shorter-term reality of increasing Coronavirus lockdowns are likely to weigh on the market in the coming weeks. Positive vaccine news combined with a goldilocks US election outcome lowers the likelihood of excessive US federal stimulus. This should cap additional upward pressure on US Treasury yields until vision increases on likely H2 ’21 US economic growth, post-vaccine distribution. Reflation remains on hold. This could limit US dollar weakness and limit positive impacts on reflationary beneficiaries such as bank valuations and Emerging Markets (EM) assets.

Bank Credit Weekly: Virus Vs. Vaccine: Time to Sell the Caa-Bull?

Philippines

UnionBank of the Philippines, together with its subsidiaries, provides various commercial banking products and services in the Philippines. It operates through Consumer Banking, Corporate and Commercial Banking, and Treasury segments. The company offers various personal banking products and services, such as savings and checking accounts, and time deposits; auto loans; debit and credit cards; trust and investment products; remittance products and services; and mobile banking services, as well as foreclosed properties and vehicles. It also provides corporate and small and medium scale enterprise products and services that consist of cash management services; various small business products and services; and treasury products. In addition, the company offers corporate and commercial banking loans; salary and mortgage loans; consumer finance products; pre-need insurance products and services; funds transfer facilities; retail and trust banking products and services; and capital markets products, as well as handles transactions in the financial markets covering foreign exchange and fixed income trading, and investments and derivatives products. Further, it provides insurance, securities, and foreign currency brokerage services; data processing services; venture capital products; financial products marketing services; and real estate administration services, as well as acts as a thrift banker. The company serves retail, middle market, corporate, and institutional customers, as well as small and medium enterprises and government institutions. As of December 31, 2014, it had 253 branches; and 243 on-site and 39 off-site automated teller machines. The company was formerly known as Union Savings and Mortgage Bank and changed its name to UnionBank of the Philippines in January 1982. UnionBank of the Philippines was founded in 1968 and is based in Pasig City, the Philippines.

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UnionBank of the Philippines (UBP PM)

Bank Credit Weekly: Jobs Report Shocker Flattens Curves

Job data raises uncertainty as the Fed continues to act as bartender. Financial stability risks appear binary while rates push credit spreads. Can...

Hank Calenti, CFA

Bank Credit Compass: Total Return Sweet Spot Moves, but May Rebound

The sweet spot for total return investors moved dramatically in April. However, as the month ended, the reflation trade returned. May could see a...

Hank Calenti, CFA

Bank Credit Weekly: One Size Does Not Fit All

Performance attributes varied amongst bank credit classes. Short duration in IG financials combined with high credit spreads in HY and more...

Hank Calenti, CFA

Bank Credit Weekly: Asia Credit Outperforms Despite Treasury Tantrum

Global bank bond prices fell by less than their benchmark notes, resulting in a bout of credit outperformance. Given the rate of change, there are...

Hank Calenti, CFA

Bank Credit Weekly: Virus Vs. Vaccine: Time to Sell the Caa-Bull?

Is it time to sell the Caa-bull market? Some AT1 bonds seem to be at a market top. We are set-up for disappointment. Nonetheless, we anticipate...

Hank Calenti, CFA

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