Morning Espresso: Financial Market Update - May 17, 2025
CACIB FIG Syndicate Morning Espresso - May 17, 2025
Macro
The European Central Bank cut its deposit facility rate by 25bps to 2.25% on April 17, marking its seventh reduction in a year as post-pandemic inflation has largely subsided. ECB President Lagarde emphasized "downside risks to economic growth have increased" and cited "escalation in global trade tensions" affecting exports, investment, and consumption. Markets have responded positively to the US-China agreement to temporarily reduce tariffs, with the S&P 500 climbing 0.70% to 5,958.38 yesterday, capping a remarkable five-day rally that pushed the index up 5.3% for the week. The Nasdaq Composite gained 0.52% to close at 19,211.10, while the Dow added 0.78% to settle at 42,654.74, moving into positive territory for 2025. Corporate activity boosted sentiment as Charter and Cox agreed to a merger valuing Cox at $34.5 billion. The current rally represents what Callie Cox of Ritholtz Wealth Management described as a "sigh of relief" following reduced tariff rates on China, though questions remain about longer-term economic impacts. Global markets have shown more stability this week following recent volatility.
Credit
Secondary credit spreads tightened across the board yesterday as market sentiment improved following the previous day's volatility. Investment grade spreads narrowed by 3bps to 91bps, while high yield saw more significant improvement, tightening 8bps to 314bps. Financial sector bonds outperformed, with senior financials closing 4bps tighter amid light primary market activity. The recovery was largely driven by reduced trade tensions after positive diplomatic signals between the US and its trading partners. Despite recent tariff-related concerns, the market appears to be stabilizing as the Credit Cycle Indicator remains in positive territory, suggesting continued credit recovery through 2025.
EURFIPrimary
The EUR FI primary market picked up pace this week with several notable transactions. Erste Group and Lloyds successfully priced senior preferred deals, while Swiss Life tapped the 10-year segment with its rare euro senior bond at a premium. Risk appetite has returned with the first AT1 issuance since March 24, demonstrating strong investor demand across the capital structure. Covered bond activity remains constructive with issuers waiting for rate stability to establish new issue premiums. Sentiment improved following the US-China tariff truce, creating a favorable backdrop for next week when we expect continued supply across all tiers of bank capital.
EURFIPipeline
Santander Exp. EUR750m 7Y Senior Société Générale Exp. EUR500m 5Y Senior Preferred BPCE Exp. EUR1bn 10Y Covered Deutsche Bank Exp. EUR750m 6Y SNP CaixaBank Exp. EUR500m 8Y Tier 2 HSBC Exp. EUR1bn 5Y Senior Preferred Nationwide Exp. EUR500m 7Y Covered ING Exp. EUR750m 4Y Senior Preferred Raiffeisen Bank International Exp. EUR500m 6Y Senior
EconomicData
19/5 – US Fed Empire State Manufacturing Index, Japan GDP Q1 20/5 – UK CPI, Eurozone Consumer Confidence 21/5 – UK Retail Sales, US Existing Home Sales, FOMC Meeting Minutes 22/5 – US Manufacturing PMI, Eurozone PMI Composite 23/5 – UK Retail Sales, Japan CPI, US Durable Goods Orders 24/5 – No major releases 25/5 – No major releases
EURFIEarningsCalendar
17/5 - BNP Paribas 19/5 - Commerzbank, Alpha Bank 20/5 - Macquarie, UBS 21/5 - Munich Re, Hannover Re 22/5 - ABN AMRO, Deutsche Pfandbriefbank 23/5 - KBC, Aareal Bank, Bayerische Landesbank 24/5 - Allianz, Aviva, Talanx
EURFISupply – Week of 13 May-17 May
ISSUE DATE ISSUER CURRENCY FORMAT ESG SIZE COUPON TENOR LANDING START MOVE NIP FINAL BOOK PEAK BOOK ATTRITION COVER PERF.
13-May-25 NORDEA BANK EUR SENIOR SLB 750 2.875% 6NC5 65 75a 10 3 1850 2200 -16% 2.5x +1
14-May-25 BBVA EUR T2 - 1000 3.375% 10.5NC5.5 145 155a 10 5 2700 3500 -23% 2.7x -2
14-May-25 CREDIT AGRICOLE EUR COVERED GREEN 500 2.750% 7 40 47a 7 2 1300 1500 -13% 2.6x -1
15-May-25 DNB EUR SENIOR - 750 2.875% 5 55 63a 8 2 1450 1600 -9% 1.9x 0
15-May-25 COMMERZBANK EUR AT1 - 500 5.750% PNC6 425 445a 20 15 3200 4500 -29% 6.4x +3
16-May-25 HSBC EUR COVERED - 1250 2.625% 5 38 45a 7 1 2100 2600 -19% 2.1x -2
16-May-25 BANCO SANTANDER GBP SENIOR - 500 3.250% 5 80 90a 10 3 850 1100 -23% 1.7x +2
CA | ✨Asia Credit ✨| Mon Petit Journal - May 17, 2025
✨|Rates
UST Close Δ O/N Δ 1W CT2 3.951% -2.3bps +7.7bps CT5 4.062% -3.1bps +5.2bps CT10 4.467% -2.5bps +3.8bps CT30 4.893% -1.2bps +2.6bps
- UST spread * Close
2y5y spread +11.1
2y10y spread +51.6
5y10y spread +40.5
5y30y spread +83.1
10y30y spread +42.6
✨|Axes
{QS} Asia USD
CACIB Security G- T- Yield ASW Sz(M)
Korea
OFFER KOREAT 6 1/2 09/07/34 106 102 5.22 153 5
BID LGELEC 5 1/4 04/16/29 96 90 4.81 128 7
BID KORGAS 6 1/4 01/20/42 - 67 - - 4
Greater China
OFFER AGRBK 1 3/8 01/25/26 30 53 4.46 29 5.5
OFFER BABA 4 1/2 11/28/34 85 84 5.15 126 2.5
BID ICBCAS 4 7/8 09/21/32 80 77 4.92 112 3
Singapore
OFFER OLAMSP 5 3/8 07/25/31 118 113 5.45 167 8
BID SIACAP 3 1/2 01/29/29 83 78 4.32 95 1.8
Others
OFFER INDKOR 3 1/4 05/22/30 72 68 4.63 105 4
BID ADGB 4 7/8 04/15/34 114 110 5.29 147 6
{qS} AUD CACIB Security Px/Spd Sz(M) BID NAB 4.75 PERP 93.75 1 OFFER CBA 4.2 03/11/30 100.4 3 BID WBC 5.1 05/21/31 102.5 2.5
✨Asia Open - Trading ✨
Korea / Japan (Jason Yang) * Korean credits opened 2-3bps tighter following the BOK's somewhat dovish commentary yesterday suggesting rate cuts could come as early as August as inflation moderates. Most active names were KEXIM and KDB 5-year paper with real money accounts adding positions. * Japanese mega banks continue to see support with MIZUHO and SMFG 10yr paper 1-2bps tighter amid strong Q1 earnings releases. Foreign investors remain net buyers as Japanese financials offer attractive pick-up over domestic alternatives. * Seeing rotation from Korean autos into electronics with SAMSNG 2028s outperforming by 3bps as tech sector shows resilience amid regional semi recovery narrative.
Greater China Fins (Harold Lam) * Chinese bank AT1s were 3-5bps wider yesterday on profit-taking after the strong rally earlier this week following PBOC's targeted stimulus measures for the property sector. * ICBC and CCB 2027s saw decent two-way flow with regional private banks selling into strength while some hedge funds beginning to rebuild positions at these levels. * Hong Kong financials continue to outperform mainland peers with HSBC 2029s 2bps tighter as capital repatriation concerns moderate and cross-border banking activity improves.
Greater China Corps (Shirley Chen) * China property saw mixed trading with investment grade names (VNKRLE, COGARD) 1-2bps tighter while high yield developers remained pressured with another 5-10bps widening amid continued sales weakness in tier 2-3 cities. * Tech names saw strong buying with BABA and TENCNT both 3-4bps tighter as regulatory headwinds ease and AI investment plans attract positive investor attention. * Industrial SOEs continue to trade well with CNOOC and SINOPE 2-3bps tighter on improved macro data and energy demand projections for H2 2025.
Singapore (David Wong) * Singapore banks traded firmly with DBS and OCBC senior paper 1-2bps tighter as regional liquidity remains strong and NIMs have proven resilient despite the rate volatility. * REITs showed modest improvement with CAPITA and MAPTRE 2-3bps tighter after stronger-than-expected occupancy data and distribution forecasts. * Seeing increased demand for SGD-denominated paper as investors look to benefit from SGD strength amid the broader USD weakness trend.
AUD (Emma Phillips) * Australian bank senior paper opened 2-3bps tighter following positive risk sentiment from the US session and constructive comments from the RBA on financial stability. * Notable outperformance in WBC 2030s which were 4bps tighter on strong buying from Japanese lifers taking advantage of attractive FX-hedged yields. * Resources sector mixed with BHP tighter by 1-2bps while smaller miners underperformed on weaker commodity price forecasts out of China.
AUD - Rates (Emma Phillips) * Australian government bonds sold off 3-5bps across the curve with 10-year yields touching 4.35%, their highest level since February, as market participants reassess RBA cut expectations. * Semi-government spreads were 1bp tighter with QTC and NSWTC outperforming after strong domestic real money demand. * Cross-currency basis widened slightly, making ACGB yields more attractive for JPY-based investors on a hedged basis.
✨ Asia/EM Primary ✨
- 14th May MANDATE: Export-Import Bank of Korea USD 144A/REG S Senior 5Y/10Y Notes MANDATE: China Hongqiao Group $Benchmark 5Y Sustainability-Linked Notes MANDATE: Greentown China Holdings $350-500m 3Y Senior Notes
- 15th May MANDATE: DBS Group USD 144A/REG S Senior 3Y/5Y Notes PRICED: Pertamina Hulu Energi $750m 5Y at 5.125%, IPT 5.375% area PRICED: Pertamina Hulu Energi $1.25bn 10Y at 5.625%, IPT 5.875% area
- 16th May PRICED: China Hongqiao Group $800m 5Y Sustainability-Linked Notes at 6.25%, IPT 6.5% area PRICED: DBS Group $1bn 3Y FRN at SOFR+85bps, IPT SOFR+100bps area PRICED: DBS Group $500m 5Y FRN at SOFR+95bps, IPT SOFR+110bps area PRICED: DBS Group $500m 3Y at 4.403%, IPT T+105bps area
- 17th May MANDATE: South Africa $Benchmark 5Y/10Y Notes MANDATE: Medco Energi Internasional $Benchmark 7NC3 FXD Notes PRICED: Greentown China Holdings $400m 3Y at 7.25%, IPT 7.5% area
✨ Macro News ✨
- China's unexpected interest rate cut of 25 basis points marks its most aggressive monetary easing since 2020, as policymakers intensify efforts to bolster a property market still under pressure and stimulate domestic consumption. The PBOC signaled further accommodative measures may follow if economic indicators continue to underperform.
- Japan's core inflation rose to 2.3% in April 2025, exceeding the Bank of Japan's target for the 37th consecutive month, reinforcing expectations the BOJ will continue its gradual normalization path with another potential rate hike in June. Governor Ueda emphasized the bank's commitment to ensuring a "smooth exit" from ultra-loose monetary policy.
- Indonesia unveiled a major $18 billion infrastructure stimulus package focused on developing its new capital city Nusantara, aiming to create 150,000 jobs and boost GDP growth by an additional 0.5% in 2025-2026. The package includes tax incentives for corporations relocating headquarters to the new capital.
- South Korea's exports surged 12.4% year-on-year in April, marking the seventh consecutive month of growth, driven primarily by semiconductor shipments which jumped 28.3%. The strong performance underscores the ongoing recovery in global tech demand, particularly for AI-related components.
- The Federal Reserve's latest minutes revealed growing consensus for a June rate cut, citing moderating inflation and cooling labor markets. Asian markets rallied on the news, with MSCI Asia Pacific index gaining 1.8% as investors anticipate improved capital flows to emerging markets once the Fed begins its easing cycle.
- India's government announced plans to raise its fiscal deficit target to 5.2% of GDP for 2025-26, up from the earlier projection of 4.9%, to accommodate increased infrastructure spending ahead of regional elections. Bond yields rose modestly on the news as investors weighed growth benefits against fiscal concerns.
- Major economic releases next week include China's Q1 GDP revision (May 20), Japan's trade balance (May 21), and Singapore's final Q1 GDP (May 22), which will provide further insights into the region's economic trajectory.
✨ Credit News ✨
- CHINA - FITCH DOWNGRADED CHINA'S SOVEREIGN CREDIT RATING IN EARLY APRIL 2025, CITING RAPIDLY RISING GOVERNMENT DEBT
- 6758 JP - SONY GROUP TO ANNOUNCE FULL-YEAR RESULTS WITH MANAGEMENT POLICY OUTLOOK; PREVIOUSLY LIFTED NET PROFIT FORECAST BY 10%
- VANKE CN - VANKE REPORTED RECORD 49.5 BILLION YUAN ($6.8 BILLION) ANNUAL LOSS FOR 2024, FIRST FULL-YEAR LOSS SINCE 1991 IPO
- 7201 JP - NISSAN POSTPONED PLANNED BOND ISSUANCE WORTH 40 BILLION YEN DUE TO MARKET VOLATILITY
- SIA SP - SINGAPORE AIRLINES SET TO ANNOUNCE FULL-YEAR RESULTS; FOCUS ON IMPACT OF INCREASED GLOBAL FLIGHT CAPACITY
- KOREA - BOK REMAINS CONCERNED ABOUT EXCEPTIONAL HOUSEHOLD DEBT LEVELS POTENTIALLY IMPACTING LONG-TERM GROWTH
- SUNTORY - SUNTORY HOLDINGS DEFERRED ISSUANCE OF 10 BILLION YEN IN SUBORDINATED BONDS PLANNED FOR EARLY APRIL
- US - MOODY'S DOWNGRADED THE UNITED STATES FROM AAA TO AA1 ON MAY 16, 2025 WITH STABLE OUTLOOK
- S-REITS - SINGAPORE REITS UNDERPERFORMING STRAITS TIMES INDEX AMID GEOPOLITICAL AND MACROECONOMIC UNCERTAINTIES
- ASIA TELECOM - SEVERAL ASIAN TECH COMPANIES WITH LOWER INVESTMENT GRADE RATINGS MAY SEE UPGRADES WITHIN TWO YEARS ON AI GROWTH