Weekly Market Review - Investfunds
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Weekly Market Review
January 24th, 2022
Highlights:
• The most significant change to the US Treasury Yield Curve occurred in the 1Y tenor with a
respective value of 7bps.
• The weakest EM country currency relative to the US dollar is RUB, with -1.57% performance.
• The strongest EM country currency relative to the US dollar is ZAR, with 1.92% performance.
• The country with the highest default probability based on 5Y CDS is Argentina, with a respective
value of 89.61%.
• The most considerable year-to-date change in default probability based on 5Y CDS is 10.05p.p. in
Argentina.
News:
• Netflix – The US-based global entertainment service provider posted decent fourth-quarter results,
but guidance was weak. For December 2021, quarterly revenue grew 16% to USD 7.71 billion, and
net income rose 12% to USD 607 million. Global streaming paid member numbers stood at 221.84
million, with the addition of 8.28 million added during Q4. New subscriber growth slowed down to
8.9% and the company expects a further slow pace for additions in Q1, 2022 due to ongoing Covid
overhang and macro-economic impacts in regions like LATAM. Currently, Netflix's 3.625% Jun
2025 bond is quoted at a 2.17% yield to maturity.
• Microsoft – The US multinational technology giant announced plans to buy game development and
interactive entertainment content market leader Activision Blizzard. The deal is all-cash, and the
transaction is valued at USD 68.7 billion, or USD 95 per share. Microsoft has indicated that they want
to play a key role in developing metaverse platforms. Currently, the 4% Feb 2055 bond is quoted at a
3.11% yield to maturity.
• Sunac China Holdings – The Chinese property developer's credit rating was downgraded to BB-
from BB by Fitch with a negative outlook. Muted sales and insufficient liquidity may deteriorate the
credit matrix further. In 2022 significant amount of bonds will be matured; CNY 12.3 billion in
onshore bonds and USD 1.2 billion in offshore bonds. The company may continue to sell onshore
assets to improve short-end liquidity. Currently, the 6.5% Jan 2025 bond is quoted at a 27.58% yield
to maturity.
• Hyundai Capital Services – The South Korean consumer financial services company raised USD
700 million by issuing senior unsecured 3.25-year (USD 400 million), 5-year (USD 300 million),
green bonds. The 3.25 and 5-years bond coupons were at 2.125% and 2.5%, respectively. Spreads
were observed at 89 bps and 104 bps, respectively. The green bond proceeds will be used to finance
green loans under a sustainable financing framework. The company is rated BBB+ by S&P.
Currently; the 2.5% Jan 2027 bond is quoted at a 2.60% yield to maturity.
© Cbonds.com | Weekly Market ReportLargest High Yield Issues
Amount, Issuer Rating End of
Issue Country
mln USD M/S/F Placement
Autostrade, 1.625% 25jan2028,
Italy 567 Ba2/BB/BB+ 18.01.2022
EUR
Autostrade, 2.25% 25jan2032,
Italy 567 Ba2/BB/BB+ 18.01.2022
EUR
China Water Affairs Group,
China 350 Ba1/BB+/– 19.01.2022
4.85% 18may2026, USD
Builders FirstSource, 4.25%
USA 1300 Ba1/BB/– 19.01.2022
1feb2032, USD
Ashton Woods USA, 4.625%
USA 400 B1/B+/– 20.01.2022
1apr2030, USD
Central American Bottling
Corporation, 5.25% 27apr2029, Guatemala 1100 Ba2/–/BB+ 20.01.2022
USD
Paraguay, 3.849% 28jun2033,
Paraguay 501 Ba1/BB/BB+ 20.01.2022
USD
*High yield placements included with an outstanding amount of more than $200 million, taking place between 17.01.2022 and
21.01.2022
Sovereign Rating Changes on January 17th – 21st
New Old Date
Country
Rating Outlook Rating Outlook Rating
Angola B- Stable CCC Stable 21-01-2022
© Cbonds.com | Weekly Market ReportCbonds Country Sovereign Eurobonds Indices
Eurobond sovereign indices measure T-spread, total yield and other indicators for the major issuing
countries. They are calculated once every trading day (at close).
© Cbonds.com | Weekly Market ReportMarket Indices & US Treasury Yield Curve
UST 2Y UST 10Y DOW NASDAQ
S&P500 SOFR
YTM YTM JONES COMPOSITE
Last value 1.01 1.75 34265.37 4397.94 13768.92 0.04
-
Change 2.02% -1.69% -4.58% -5.68% -7.55%
20.00%
*The change for all indices except SOFR is calculated as a difference between values at 14.01.2022 and 21.01.2022. For SOFR
change calculated as a difference between values at 14.01.2022 and 20.01.2022.
In a truncated week, US markets continued to trend downwards and ended sharply lower. Risk aversion has
increased over persistently higher inflation, the current Omicron Covid-19 spread, expectations of faster
interest rates hikes, and the uncertain impact of these factors on the economy. The Leading Economic Index,
which measures the US business cycle, rose 0.8% in December 2021. The Dow Jones and S&P 500 indexes
were down by 4.58% and 5.68% WoW, respectively.
The weekly jobless claims rose by 286k, the highest in the last 3-months. This weighed on bond markets.
Last week, the yield curve flattened. The short end rose by 2-7 bps while the mid to long end declined by 1-5
bps. The US 10-year benchmark bond touched 1.90% during the week and closed 3 bps down, at 1.75%.
© Cbonds.com | Weekly Market ReportCurrency Rate Indices
Currency rate indices track US dollar dynamics relative to foreign currencies. They are calculated once every
trading day (at close).
© Cbonds.com | Weekly Market ReportICE and Interactive Default Probability Indices
Default probability indices assess the risks on the Sovereign debt market for the respective country. They are
calculated based on CDS for terms of between 3 months and 30 years and calculated once every trading day
(at close).
© Cbonds.com | Weekly Market ReportWeekly Knowledge Hub:
Asset-Backed Commercial Paper
Asset-backed commercial paper is a short-term financial instrument. It is usually used to diversify portfolios
and generate short-term earnings. Its maturity is between 90 and 270 days and is usually issued by a financial
institution or a large company in order to repay short-term debts and/or liabilities. Normally the guarantee of
this type of commercial paper is given by the issuer itself through its physical assets such as for example,
trade receivables. It, therefore, responds to short-term liquidity needs.
This type of commercial papers are issued by a vehicle company (SPV) set up specifically for the occasion.
The expiry date is set no later than 270 days from the issue. The difference with a typical commercial paper
is its guarantee: in fact, the issuer guarantees the solidity of the ABCP with a variety of financial assets such
as, for example, commercial loans, CDOs. All assets pledged as collateral usually have very high credit
ratings (AAA).
Therefore, ABCPs are purchased by investors at a discount price compared to their nominal value and, on the
expiry date, receive a refund equal to 100% of their nominal value. This activity also includes placement
agents (usually investment banks) who are responsible for ensuring the reimbursement of investors by the
issuing SPV. The advantages of this particular type of commercial cards are their source of liquidity in the
short term at not very high risk (by virtue of the very nature of a short-term instrument). They are also safer
than standard Commercial Papers as the latter do not have guarantees. The main problem, on the other hand,
lies in the nature of the financial assets pledged as collateral. In fact, during the 2007-08 crisis, it was seen
how very often SPVs pledged more and more illiquid or leveraged assets which therefore do not ensure the
same level of security. Furthermore, the financial assets pledged as collateral must be consistent with the
time maturity of the ABCPs: mortgages should never be pledged as collateral by virtue of their long-term
nature.
Read more about bond types in the Cbonds glossary
Contact details:
Paresh Nemade, India Representative,
tel: + 91 9221297616, pareshnemade@cbonds.info
Cbonds subscription: pro@cbonds.info
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