EM ASIA CREDIT: CDB Aviation (CDBALF, A2/NR/A) fair value estimate on $ mandate
"*MANDATE: CDB AVIATION USD REG S SENIOR NOTES" - BBG
Mandate: $ senior notes, tenor TBA
FV estimates on possible 3y, 5, and 10y points.
3y: around z+105bp
5y: around z+115bp
10y: around z+125bp
• State owned China Development Bank Financial Leasing (CDB Leasing), one of China's leading financial leasing companies, has mandated banks for a proposed $ senior deal to be issued out of its wholly owned subsidiary, CDB Aviation Lease Finance Designated Activity (CDB Aviation). The issuer, CDBL Funding 1 - an offshore SPV of CDB Aviation - will be unconditionally and irrevocably guaranteed by CDB Aviation. The bond will also benefit from a keepwell and asset-purchase deed provided by CDB Leasing in favour of CDB Aviation.
• For fair value, we focus on the potential of a 3y, 5y or 10y bond and include $ bonds issued by China (A1/A+/A), China Development Bank (NR/A+/NR), China Tourism Group (A3/A/A) and the existing CDBL Funding 1 (A2/NR/A) and CDBL Funding 2 bonds (A2/NR/A).
• China Development Bank (CDB), the majority owner (64%) of CDB Leasing, has a well-developed $ curve and forms the pricing anchor. The existing $400m 10/27 CDBL Funding 1 bond, from the issuer, trades c. 45bp wide to the CDB curve and I assume that it's not that liquid given it was issued in 2017. We believe it could trade up to another 10bp wider for a more liquid bond, and expect a new deal would come around 55bp wide to the CDB curve. We think the CDB curve shape can be applied to the new issue.
• Therefore in terms of fair value, we think a 3y at z+105bp, a 5y at z+115bp and a 10y at z+125bp. We now await more details on size and maturity in the coming days.
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LOOK AHEAD: Eurozone Timeline of Key Events (Times BST)
| Date | Time | Country | Event |
| 25-Apr | 0745 | FR | Manufacturing Sentiment |
| 29-Apr | 0700 | DE | GFK Consumer Climate |
| 29-Apr | 0800 | ES | HICP (p) / GDP |
| 29-Apr | 0900 | EU | M3 / Consumer Expectations Survey |
| 29-Apr | 0900 | IT | ISTAT Confidence Indices |
| 29-Apr | 1000 | EU | Consumer Confidence, Industrial Sentiment |
| 30-Apr | 0630 | FR | GDP (p) / Consumer Spending |
| 30-Apr | 0700 | DE | Import/Export Prices / Retail Sales |
| 30-Apr | 0745 | FR | HICP (p) / PPI |
| 30-Apr | 0855 | DE | Unemployment |
| 30-Apr | 0900 | DE | GDP (p) / State level CPI |
| 30-Apr | 0900 | IT | GDP (p) |
| 30-Apr | 1000 | EU | GDP preliminary flash est. |
| 30-Apr | 1000 | IT | HICP (p) |
| 30-Apr | 1100 | IT | PPI |
| 30-Apr | 1300 | DE | HICP (p) |
JGBS: Twist-Steepener Holds Going Into W/E, BoJ Gov Ueda Reiterates Caution
JGB futures are stronger, +18 compared to settlement levels, sitting near the middle of the range after a choppy session.
- “Governor Kazuo Ueda reiterates his stance that the central bank will carefully monitor if its economic outlook will be realized, accounting for the effects of US tariff measures, without preconception. The BoJ will raise the benchmark rate if the outlook is realized, Ueda says in response to questions in parliament.” (per BBG)
- “Fukoku Mutual Life Insurance Co. plans to invest in Japan's super-long government bonds this fiscal year after their yields skyrocketed. The company aims to increase domestic government bond holdings by ¥30 billion, with gross purchases potentially reaching ¥300-400 billion.” (per BBG)
- Earlier today, Headline CPI for March showed +3.6% y/y versus +3.7% estimate. Core and Core-Core printed +3.2% y/y and +2.9% y/y, respectively, versus estimates of +3.2% and +2.9% and priors +3.0% and +2.6%.
- Cash US tsys are closed today for the Good Friday holiday.
- Cash JGBs have twist-steepened, pivoting at the 20-year, with yields 2bps lower to 5bps higher.
- Swap rates are 2bps lower to 2bps higher, with a steepening bias.
- On Monday, the local calendar will see Tokyo Condominiums for Sale data.
CHINA: Bond Futures Marginally Up Despite Liquidity Injection.
- China’s bond market reacted very little to a second day of sizeable liquidity injection.
- China’s 10YR bond future is up just +0.03 at 109.04 and remains firmly above all major moving averages. The nearest being the 20-day EMA at 108.61.
- The 2YR bond future is down -0.02 at 102.46; remaining below all major moving averages – the nearest being the 20 day EMA at 102.52.
- The 10YR CGB is marginally lower in yield at 1.64%
