Navigating the seas of US bonds, interest rates with Bloomberg
ALBAWABA – Markets are buzzing with anticipation as the United States (US) Treasury Department is scheduled to issue another batch of high-grade US bonds, worth $20 billion, with interest rates near the highest levels since 2008, Bloomberg reported Sunday.
This is the second batch of US bonds issued by the treasury, after last week’s $50 billion in bonds.
Overall, the treasury is estimated to issue over $1 million in treasury bonds to finance its deficit.
Notably, the tides are changing in the world of finance, with the global and US banking sectors facing various challenges, such as credit crunches and liquidity concerns.
The Credit Suisse bank’s acquisition by UBS is the latest in a series of collapses in the smaller and regional banks sector, since the beginning of 2023. The acquisition is expected to conclude Monday, Bloomberg predicted.
Economy matters
In the realm of economic data, the US Consumer Price Index (CPI) figures are scheduled for release on Tuesday. Despite various market fluctuations, the Federal Reserve is likely to keep interest rates steady at its meeting on Wednesday, Bloomberg insists.
However, this pause in rate hikes is not expected to last for an extended period.
In contrast, the People's Bank of China is speculated to take a different approach by cutting rates on Thursday.
Across the continent, the European Central Bank seems to be leaning in the opposite direction and may consider raising rates.
Amid these developments, leveraged loans, worth billions of dollars, are in a race against time to shift away from the LIBOR (London Interbank Offered Rate).
With LIBOR set to be phased out by the end of June, a trade group representing the $1.4 trillion leveraged loan market is calling on key figures, including US Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell, to support excluding loans from securities laws, Bloomberg reported.
Another issue facing US banks is the declining demand on commercial real estate, which is a threat to the smaller and regional banks sector.
Mortgage bondholders are growing increasingly concerned as landlords fall behind on repayments at the highest rate in five years, according to Bloomberg. As a result, refinancing these loans becomes more challenging, as tighter rules and scrutiny apply to banks that exceed the set guidelines.
Market matters
Moreover, companies in distress that are raising additional funds from investors are, in many instances, merely postponing an inevitable collapse. Such last-ditch financing efforts can often exacerbate losses for all parties involved.
In personnel news, Matthieu Boulanger, KKR & Co.’s former co-head of private credit, is slated to join HPS Investment Partners, an alternative asset manager with $101 billion in assets, as the head of its European division.
Italian confectionery giant Ferrero SpA recently secured over $1 billion in high-grade private debt, aiming to refinance part of its bank loans, sources told Bloomberg.
In the UK, companies including Iceland Foods and Boparan Holdings Ltd. have approximately $17.8 billion in high-yield bonds maturing in 2025. The projected cost of refinancing is nearly double what they currently pay in servicing the debt.
After the Bank of England concluded its corporate debt sales program, companies issuing high-grade sterling bonds are expected to face less competition for investors' attention.
In India, the anticipated continuation of the pause on interest rate hikes is likely to bolster sales of local bonds, which are already at a record high. However, foreign-currency note deals have plummeted to a seven-year low, Bloomberg reported.
In China, Haitong International Securities Group Ltd. has reduced its dollar-bond exposure to Chinese property developers and is reallocating capital towards US sovereign and investment-grade credit.
Lastly, China Merchants Bank successfully sold $400 million in blue bonds, a sustainable debt instrument that finances water projects and ocean preservation. This marks at least the third blue bond deal in Asia this year.
