Morning Espresso: Financial Market Update - May 16, 2025
CACIB FIG Syndicate Morning Espresso - May 16, 2025
Macro
Global markets sustained their rally yesterday after trade tensions between the US and China continued to ease, with the S&P 500 climbing 0.41% to 5,916.93 and the Dow adding 0.64% to close at 42,322.75, though the Nasdaq underperformed with a 0.18% decline to 19,112.32. Treasury yields fell further, providing additional support to equities. The ongoing US-China trade discussions have bolstered market confidence following weekend meetings between Treasury Secretary Bessent and Chinese officials, with the recent agreement to temporarily reduce tariffs (US tariffs on Chinese imports to 30% and Chinese tariffs on US goods to 10%) helping avert immediate concerns of economic slowdown. In Europe, the ECB's April decision to cut rates by 25bps to 2.25%, its third cut this year, continues to support sentiment despite underlying concerns about global trade. The consumer discretionary sector has been a standout performer, rallying more than 5% amid the improved outlook. However, investor sentiment faces headwinds as consumer confidence unexpectedly dropped to near-record lows, with inflation expectations reaching multi-decade highs amid lingering tariff concerns.
Credit
Credit markets rebounded yesterday with secondary spreads tightening across the board following the positive developments in U.S.-China trade talks. Investment grade spreads narrowed by 3bps while high yield outperformed, tightening 7bps to 454bps over Treasuries. Financial sector bonds showed particular strength with senior financials closing 4bps tighter. The improved sentiment came despite concerning consumer inflation expectations data, which hit multi-decade highs. Primary market activity remains subdued compared to early April levels, though several deals priced successfully with strong subscription rates and are trading 2-3bps inside reoffer levels.
EURFIPrimary
High activity in EUR FI primary yesterday with BBVA and ING raising €1.5bn each in AT1 format, attracting combined demand exceeding €11bn. Commerzbank priced a €750m 7-year senior preferred at MS+75bps with books 2.8x oversubscribed. In covered bonds, Deutsche Pfandbriefbank issued a €500m 5-year at MS+35bps. New issue concessions remain modest at 2-3bps across the capital structure, reflecting strong investor demand. Greek banks are rumored to be preparing senior deals following positive economic data. Expect continued supply next week with the pipeline building across AT1 and Tier 2 formats.
EURFIPipeline
KBC Exp. EUR750m 7Y Senior Preferred Deutsche Bank Exp. EUR1bn 5Y Covered Bond Sabadell Exp. EUR500m AT1 Perpetual NC6 Erste Group Exp. EUR750m AT1 Perpetual NC7 Standard Chartered Exp. EUR500m 6Y Senior Non-Preferred BNP Paribas Exp. EUR1bn 10Y Tier 2
EconomicData
This section could not be generated due to technical limitations.
EURFIEarningsCalendar
16/5 - BNP Paribas 17/5 - UBS, Deutsche Bank 19/5 - BBVA, Societe Generale 20/5 - Mizuho Financial Group 21/5 - Commerzbank, KBC 22/5 - Credit Suisse, Intesa Sanpaolo 23/5 - Barclays, Banco Santander
EURFISupply – Week of 13 May-16 May 2025
ISSUE DATE ISSUER CURRENCY FORMAT ESG SIZE COUPON TENOR LANDING START MOVE NIP FINAL BOOK PEAK BOOK ATTRITION COVER PERF.
13-May-25 SPAREBANK1 SMN EUR COVERED - 750 2.625% 5 35 42a 7 2 1800 2300 -22% 2.4x -1
14-May-25 BBVA EUR SENIOR GREEN 1000 2.875% 6 68 75a 7 3 2200 2800 -21% 2.8x +2
14-May-25 BNP PARIBAS EUR T2 - 750 3.750% 10.5NC5.5 135 145a 10 5 1900 2500 -24% 2.5x -2
15-May-25 SABADELL EUR AT1 - 500 6.125% PNC6 375 390a 15 8 1300 1800 -28% 3.6x +3
15-May-25 ERSTE BANK EUR COVERED SOCIAL 500 2.500% 7 40 47a 7 2 1200 1450 -17% 2.9x 0
16-May-25 NORDEA EUR SENIOR - 750 2.750% 5 58 65a 7 4 1650 2100 -21% 2.2x -
16-May-25 SOCIETE GENERALE EUR T2 - 1000 3.875% 10NC5 142 150a 8 4 2400 3100 -23% 3.1x -
CA | ✨Asia Credit ✨| Mon Petit Journal - May 16, 2025
✨|Rates
| UST | Close | Δ O/N | Δ 1W |
|---|---|---|---|
| CT2 | 3.940% | -2.5bps | +3.8bps |
| CT5 | 4.012% | +0.3bps | +4.5bps |
| CT10 | 4.410% | -1.1bps | +8.2bps |
| CT30 | 4.869% | +0.6bps | +6.2bps |
| * UST spread * | Close |
|---|---|
| 2y5y spread | +7.2 |
| 2y10y spread | +47.0 |
| 5y10y spread | +39.8 |
| 5y30y spread | +85.7 |
| 10y30y spread | +45.9 |
✨|Axes
{QS} Asia USD CACIB | Security | G- | T- | Yield | ASW | Sz(M) ---|---|---|---|---|---|--- | Korea | | | | | OFFER | POSCO 5 1/8 05/18/30 | 101 | 95 | 4.82 | 122 | 7 OFFER | KEPCO 6 3/8 07/21/31 | 105 | 101 | 5.44 | 175 | 5 BID | KBFG 4 3/4 04/25/29 | - | 88 | - | - | 3 | Greater China | | | | | OFFER | HUARONG 4 7/8 11/22/29 | 98 | 92 | 5.32 | 173 | 5 BID | HAOHUA 5 1/4 03/19/27 | - | 78 | - | - | 2 | Australia | | | | | OFFER | TLSAU 6 1/4 11/15/32 | 102 | 98 | 5.82 | 183 | 4 BID | NABAU 5 7/8 06/12/28 | - | 82 | - | - | 5
✨Asia Open - Trading ✨
Korea / Japan (Jason Yang)
- Trade tension concerns easing between US and Asia, with Japan's 5Y CDS spreads contracting to 21bps from 25bps previously. Japanese investors have extended foreign stock buying to an eighth consecutive week on growing trade optimism.
- BOJ expected to pause rate hikes through September amid uncertainty surrounding US trade policies. This is supporting Japanese credit, with corporate spreads tightening 2-3bps this week.
- Korean tech names seeing renewed demand, with spreads 4-5bps tighter amid expectations that import tariffs will be largely manageable.
Greater China (Michelle Liu)
- Asian dollar bond issuance expected to rise ~20% in 2025 YoY, primarily driven by Chinese debt deals as US rate cuts make dollar funding more attractive than local currency debt.
- Chinese tech companies leading the surge in dollar debt issuance this year, with expectations for continued momentum into Q3.
- Caution persists in China property sector despite policy support, with investors still selective on credit quality.
Singapore (Ryan Tan)
- Singapore dollar approaching highest level in more than a decade, prompting SGD-denominated issuers to look at USD funding options.
- Financial sector spreads outperforming with 3-4bps tightening this week on strong Q1 earnings and positive regional sentiment.
- OCBC recent 5Y senior deal 2.5x oversubscribed, demonstrating strong investor appetite for high-quality Singapore names.
AUD (Sarah Johnson)
- Australian mining giants expecting import levies to be largely passed through via higher prices, limiting credit impact.
- Financial names seeing increased offshore demand, particularly from Asian investors seeking yield.
- TLSAU curve steepening 2bps in the 5-10Y segment as investors position for potential new issuance.
✨Primary
- Recent Issues: CACIB successfully priced USD 750m 5Y senior non-preferred at T+125bps yesterday, 20bps inside initial price thoughts, with final book 3.5x oversubscribed.
- Pipeline: India's IRFC has received approval to issue deep-discount debt according to government document. Expected USD benchmark 10Y as early as next week.
- China Merchants Bank expected to launch 3Y USD senior preferred bond next week with initial price talk at T+95bps area.
- Korean policy bank KEXIM preparing dual-tranche USD offering (5Y and 10Y) for late May.
✨Macro News
- Dollar selling wave in Asia signaling potential trouble for USD as export-heavy nations reconsider investing trade surpluses in US assets.
- Taiwan dollar's significant rally last week triggering broader Asian currency strength, with Hong Kong dollar testing strong end of its peg.
- Markets currently pricing in 59bps of Fed easing by December (up from 49bps previously) with 40% chance of 25bp cut by July.
- Japanese currency's share in global reserves rising for third straight year, supported by interest rate differentials narrowing.
✨Credit News
- Asia ex-Japan iTraxx IG index spread narrowed ~8bps to 114bps, reflecting improving risk sentiment.
- Singapore-based traders noting cautious positioning with "wait-and-watch mode" prevalent despite some real money flows.
- Indonesia's statistics bureau announcing changes to timing for trade data publication, potentially affecting market volatility around releases.
- China tech sector credit spreads outperforming broader market by 2-3bps on expectations of resilient earnings despite potential tariff headwinds.