May 16, 2025

Morning Espresso: May 16, 2025

CACIB FIG Syndicate Morning Espresso - May 16, 2025

Macro

The European Central Bank delivered its third interest rate cut of 2025 yesterday, lowering the deposit facility rate by 25bps to 2.25% amid growing concerns over eurozone economic growth. President Lagarde characterized the move as a "prudent response" to the uncertainty created by global trade tensions, despite some analysts anticipating a more aggressive 50bps reduction. Markets reacted positively to the rate cut, with the STOXX 600 gaining 0.47% and European sovereign yields declining 3-5bps across core markets. Meanwhile, equity markets extended their rally for the fourth consecutive session as the U.S. and China's agreement to temporarily reduce tariffs continued to boost sentiment. The S&P 500 added 0.41% to close at 5,916.93, while the Dow climbed 0.65% to 42,322.75, though the Nasdaq underperformed, slipping 0.18%. Treasury yields fell further, providing additional tailwind to risk assets as investor confidence solidified following productive weekend discussions between Treasury Secretary Bessent and Chinese officials. Tech giants showed particular strength this week, with Nvidia and Tesla both advancing approximately 15% on renewed optimism about global trade prospects.

Credit

Credit markets staged a modest recovery yesterday with spreads tightening across the board as fears of trade-related volatility eased. Investment grade narrowed by 3bps to 117bps, while high yield outperformed with a 7bps compression to 454bps. Financial bonds followed the positive sentiment with senior spreads tightening 2-3bps. The improvement came as investors digested news of potential negotiations to moderate some of the recently announced tariffs, providing temporary relief after weeks of widening pressures. Secondary market liquidity improved with deal flow increasing 15% compared to the previous session.

EURFIPrimary

The EUR FI primary market picked up significantly this week with several noteworthy issuances across the capital structure. Nationwide's euro covered bond print priced in line with peers, offering a low single-digit concession that reflects the current market tone. Investors continue showing strong appetite for bonds yielding above 3%, creating a supportive backdrop for issuers. However, some banks are still waiting for rate stability before tapping the market. Given the positive reception of recent deals and clean issuance window next week (with limited data releases), we expect the pipeline to remain active, particularly in the senior preferred and covered bond space.

EURFIPipeline

Santander Exp. EUR750m 7Y Senior Preferred Société Générale Exp. EUR500m 5Y Senior Non-Preferred Wüstenrot Bausparkasse Exp. EUR500m 5Y Senior Preferred Gulf International Bank Exp. EUR600m 6Y Senior Unsecured BBVA Exp. EUR1bn 10Y Covered Bond Commerzbank Exp. EUR750m 8Y Green Senior Non-Preferred Credit Agricole Exp. EUR500m 6Y Social Bond

EconomicData

16/5 – US Retail Sales, US Industrial Production 19/5 – Japan GDP, Eurozone Construction Output 20/5 – UK CPI, US Housing Starts 21/5 – UK Retail Sales, US Existing Home Sales, FOMC Meeting Minutes 22/5 – Eurozone Flash PMIs, US Flash PMIs, US Weekly Jobless Claims 23/5 – UK Flash PMIs, US Durable Goods Orders 24/5 – Germany IFO Business Climate

EURFIEarningsCalendar

17/5 - BNP Paribas, Deutsche Bank, Mizuho Financial Group 19/5 - Societe Generale 20/5 - BBVA, UBS 21/5 - Commerzbank 22/5 - Credit Suisse, Santander 23/5 - Barclays, Lloyds Banking Group

EURFISupply - Week of 13 May to 16 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	Green	750	2.875%	6Y	75	85a	10	3	1850	2300	-20%	2.5x	-1
14-May-25	COMMERZBANK	EUR	T2	-	500	4.125%	10.5NC5	215	230a	15	7	1350	1700	-21%	2.7x	+2
14-May-25	RABOBANK	EUR	COVERED	-	1000	2.625%	7Y	37	45a	8	2	1950	2400	-19%	1.9x	-2
15-May-25	BANCO SANTANDER	EUR	SENIOR	Social	1250	3.000%	8Y	85	95a	10	5	2650	3100	-15%	2.1x	0
15-May-25	CRÉDIT AGRICOLE	EUR	AT1	-	750	5.375%	PNC6	375	395a	20	12	3250	4200	-23%	4.3x	+3
16-May-25	DANSKE BANK	EUR	COVERED	Green	500	2.500%	5Y	35	42a	7	1	1450	1800	-19%	2.9x	-1

CA | ✨Asia Credit ✨| Mon Petit Journal - May 16, 2025

✨|Rates

UST Close Δ O/N Δ 1W CT2 3.945% -3.0bps +7.1bps CT5 4.155% -2.5bps +5.7bps CT10 4.422% -3.0bps +8.0bps CT30 4.768% -2.2bps +4.3bps

• UST spread * Close
  2y5y spread +21.0
  2y10y spread +47.7
  5y10y spread +26.7
  5y30y spread +61.3
  10y30y spread +34.6

✨|Axes

{QS} Asia USD CACIB Security G- T- Yield ASW Sz(M) Korea
OFFER KORELE 5 1/8 03/15/34 98 94 5.29 140 8 OFFER KEBHNB 4 7/8 05/25/31 100 96 4.88 126 5 BID KBINTL 5 1/4 01/15/33 - 55 - - 10 China
OFFER HUAWEI 4 3/8 02/21/29 95 91 4.98 139 7 BID ICBCAS 4 7/8 09/21/28 - 40 - - 8 Singapore
OFFER OLAMSP 5 3/8 07/24/26 99 95 5.52 172 6 BID UOBSP 4 1/4 03/15/32 - 45 - - 5

{QS} AUD CACIB Security G- T- Yield ASW Sz(M) OFFER NSWTC 4.75 05/15/31 85 81 4.78 65 10 BID SUNAU 5.25 10/10/28 - 35 - - 8

✨Asia Open - Trading ✨

Korea / Japan (Jason Yang)
* Asian credit markets continued to stabilize following US/China trade talk progress. Korean spreads tightened 2-3bps across the curve with tech names outperforming on positive trade sentiment. Financial paper saw good two-way flows with domestic accounts focusing on shorter-dated KBs. Japanese credits remained largely unchanged with modest buying interest in MUFG 28s and Mizuho 30s.

Greater China (Wei Zhang) * Chinese tech bonds continued recovery mode, tightening 3-5bps on reports that US/China negotiators made progress on sector tariff exemptions. Higher beta property names saw strong relief rally (+8-10bps) following PBoC liquidity injection. Taiwan tech spreads narrowed alongside record currency strength with TSMC 5-year paper trading inside secondary market levels.

Singapore / Thailand / Malaysia (Karina Lim)
* Singapore credits found mild support with Temasek-linked names outperforming (+1-2bps). Malaysian quasi-sovereigns were well bid as the ringgit strengthened against USD. Thai banks traded sideways despite positive local equity market performance.

AUD (Michael Davidson)
* Better bid tone across AUD credit markets following global risk rally. Semi-government saw good buying from offshore accounts, tightening 3-4bps across the curve. Domestic real estate names outperformed on rising housing data. Bank hybrid market softer as investors positioned for upcoming CBA T2 issuance.

✨|Primary 🔥

• Kookmin Bank (A1/A+) announced roadshow for USD 5yr senior benchmark offering, expected to price next week.
• Lenovo Group (Baa2/BBB-) mandated banks for USD 3yr and 5yr dual-tranche offering with IPTs at T+140bps area and T+165bps area respectively.
• Jardine Matheson (A2/A) announced plans for 10yr SGD bond with potential pricing by month-end.
• Woolworths Group (Baa2/BBB) looking to issue AUD 7yr sustainability-linked bond, with pricing expected early next week.

✨|Macro 📊

• BOJ expected to maintain current policy settings at next week's meeting amid recent yen weakness.
• China's April industrial production rose 5.2% y/y (vs 5.0% est) while retail sales increased 4.8% y/y (vs 4.5% est), signaling economic resilience.
• Singapore Q1 GDP revised higher to 3.1% y/y (vs 2.8% preliminary) supported by strong manufacturing performance.
• Australia unemployment rate ticked up to 4.1% in April (vs 3.9% est) as job growth slowed, limiting RBA's room for rate hikes.

✨|Credit 📰

• Samsung Electronics announced $8bn investment in AI semiconductor development to strengthen global competitiveness.
• Chinese property developer Longfor Group secured $1.5bn credit facility from state banks, underscoring government support for higher-quality developers.
• Singapore's DBS completed acquisition of Citigroup's Taiwan consumer banking business, expanding regional footprint.
• Australian infrastructure giant Transurban received regulatory approval for Queensland toll road acquisition, supporting 2025 earnings outlook.
• JG Summit (Philippines) announced deleveraging plans with potential non-core asset sales targeted for H2 2025.