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Warning signs emerge in credit markets as yields rise
(Bloomberg) – Concern is mounting in corporate credit markets globally as long-term treasury bill yields continue to rise, leading borrowers from New York to Tokyo to delay loans. bond sales and strategists to warn of upcoming problems. Friday. Two borrowers who expected to sell bonds in the United States chose to push back their offers next week, after a stronger-than-expected jobs report raised further concerns about inflation and briefly raised the 10-year Treasury rate above 1.6%. The additional yield demanded by investors to hold U.S. corporate bonds rose 4 basis points on Friday to 96 basis points, the biggest jump since November 12, according to Bloomberg Barclays Index data. billion bonds after failing to reach agreement with investors on conditions. And in Asia, two state-owned companies in India withdrew scheduled rupee ticket sales on Thursday, and at least three Japanese companies have postponed yen debt offers in recent days. obligations. In the US credit derivatives market, the Markit CDX North American Investment Grade Index, which investors use to protect against corporate note defaults, fell from a four-month high, indicating that companies who trade this instrument are a little less concerned about credit risk. Brokers are forecasting up to $ 50 billion in bond sales next week, after more than $ 65 billion in sales this week, but market sentiment could change. On Thursday, companies selling bonds in the United States received orders for just 1.8 times the amount of debt to sell, well below the average of 3.2 times for this year or four times for the all of last year, according to data compiled by Bloomberg. start sounding the alarms. Bank of America Corp. cut U.S. investment grade credit to underweight in a note dated Thursday, citing expectations that yields will continue to rise, likely pushing credit spreads wider. The underweight is a temporary transaction, wrote strategists led by Hans Mikkelsen. Citigroup Inc. warned high profile investors to “prepare for cash outflows” in a note on Thursday. Tighter spreads no longer offset rising Treasury yields, wrote strategists led by Daniel Sorid, adding that a flight to shorter duration strategies could be ahead. The speed at which rates have risen is a concern for Barclays Plc, which expects a “change in sentiment” on credit, according to a Friday memo. Spreads have been resilient so far, “but there is a risk of Short-term spreads due to a more disorderly rate hike, “strategists Bradley Rogoff and Shobhit Gupta wrote. Newspaper webinar that recent surge in yields was notable, but declined to rely on the tools that could be used if disorderly conditions or a persistent tightening in financial conditions threatened the Fed’s targets. With rising energy prices and Covid-19 vaccines fueling the bets that an economic rebound will boost inflation, Funding costs have started to rebound from recent lows. In Europe, issuance remains robust for now, and despite recent upheavals, bond selling remains me ns expensive Corporations and governments have sold more than 407 billion euros ($ 487 billion) in bonds so far this year, the fastest pace of issuance on record in the region, according to compiled data by Bloomberg. take advantage of this favorable environment provided by central banks, before the market begins to anticipate a downturn, ”said James Cunniffe, director of corporate syndicate at HSBC Holdings Plc. “As we move into the second quarter, we expect to see a more normalized level of supply revert to volumes from previous years.” The American mobile game company Playtika Holding Corp. sold its first junk bond on Friday. A group of unsecured lenders to Hertz Global Holdings Inc. are proposing an alternative reorganization of the car rental company that would go public, a move that flies in the face of a plan to sell the company to two funds of investment for up to $ 4.2 billion. more, click here for the Credit Daybook AmericasEurope Booming ethical debt sales increased green, social and sustainable debt market share to 17% of syndicated debt volumes this year, from around 7% a year earlier. finally in view of retirement after the UK Financial Conduct Authority has confirmed that final readings of most rates will take place on December 31. The most underwritten transaction in the European primary market this week, according to data analyzed by BloombergAsiaChina Ji’an Chengtou Holding Group was the only borrower to sell a dollar bond on Friday. months on unfavorable base effects and higher commodity prices, ”said Michael Biggs, macro strategist and chief investment officer at GAM in London. “We don’t think the rise in inflation will be sustained, but it could scare the market” Combined with relatively lower liquidity relative to the investment grade and potential exits, Asian high yield is ripe for a correction , according to Ek Pon Tay, a senior portfolio manager of emerging markets debt at BNP Paribas Asset Management In mainland China, a recent rise in defaults has led investors to favor safer assets, which translates into premiums lower risk for the highest rated corporate bonds in local currency. articles like this please visit us at bloomberg.com Subscribe now to stay ahead with the most trusted source of business news. © 2021 Bloomberg LP
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