Eurobond rates, bond issues

U.S. Treasuries rose, along with most global bonds, ahead of the U.S. midterm results and Thursday’s U.S. CPI data. Bonds rose in anticipation of a divided Congress that could have some impact on government spending and thus limit inflation. Overall UST returns are lower. The UST 2Y yield was down at 4.66%, while the much-tracked UST 10Y yield fell even more to 4.14%. Markets will continue to take cues from the results of the US midterm elections, the US CPI and the upcoming bond supply. Yesterday’s $40 billion 3Y bond auction attracted a good 2.57x bid with a high yield of 4.605% (previously 4.318%). Next will be the US$35 billion 10Y bond sale, followed by the October CPI. Another strong inflation pressure will reinforce expectations that Fed policy tightening will stay longer and higher.

There are two details that stand out in the interest rate increase in the FOMC:

-While determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, delays in monetary policy’s impact on economic activity and inflation, and economic and financial developments.

-We are monitoring the effects of rate hikes, but there is considerable uncertainty about the endpoint.

The first is related to the desire to see the lagged effects of monetary policy. So this is a sentence that leads to lower rate hikes in the future. However, the detail in the second sentence is the issue that needs attention; The uncertainty of the point of rate hikes here reveals that there is a possibility that the terminal rate will actually be higher. The expected 50 bps in December may indicate that we are now moving to smaller bands. However, the fact that the terminal rate expectation is still at the same level and even moving a little higher shows that we are not close to the end yet. The Fed will have formalized these expectations when it releases its new projections in December.

Since the 2 and 10-year spreads are quite narrow, it is still read as a recession indicator detail. Considering factors such as the company financing cost of rising interest rates and its reflection on activity and employment, the financial conditions created by the Fed’s maximum rates may increase this recession coefficient. This is partly due to the Fed’s analysis that it cannot raise interest rates too much or bring inflation above its current levels. Some central banks, like the BOE, have lowered their rate hike expectations.

If we look at Turkish assets; The Treasury issued eurobonds at a time when Turkey’s credit default swaps were easing more than 250 basis points from their annual high. The Ministry of Treasury and Finance reported that the demand for 2028 Eurobond issuance, amounting to $1.5 billion, with 10% yield and 9.875% coupon rate, is more than three times the issue amount. The 5-year CDS has dropped to 619 basis points, testing its lowest levels since May. Yields on the 10-year dollar bond fell below 10%, the lowest level since mid-September. USD/TRY fell slightly to 18.42 on Monday evening, but reached 18.6066.

In the written statement made by Denizbank, it was stated that a syndication loan of 605 million dollars was provided with a maturity of 367 days and an ESG connection. This indicates a 78% refresh rate. The one-year syndicated loan (US$276.5 million + EUR 329.5 million) has costs of Sofr + 4.25% and Euribor + 4.00% according to the latest deals.

Kaynak: Tera Yatırım-Enver Erkan
Hibya Haber Ajansı