EM ASIA CREDIT: FWD Group Holdings: New USD deal FV
(FWDGHD, Baa1/NR/BBB)
"*IPT: FWD GROUP $BMRK 5Y AT +210BPS A, 10Y AT +230BPS AREA" - BBG
New Issue: $benchmark 5Y
IPT: T+210bp (¬z+248bp)
FV: T+167bp area (¬z+205bp)
New Issue: $benchmark 10Y
IPT: T+230bp (¬z+283bp)
FV: T+192bp area (¬z+245bp)
Hong Kong-based insurance company FWD Group (FWDGHD) is launching a dual-tranche USD subordinated bond offering.
Fitch has assigned a BBB- rating to the proposed subordinated notes, two notches below the issuer default rating of BBB+ and one notch below the senior unsecured rating of BBB. The agency regards the risk of triggering lock-in clauses at redemption or coupon deferrals due to failure to meet minimum capital requirements as "minimal."
The proceeds will be used for general corporate purposes and to refinance the USD900m 8.4% 2029 notes (tender launched) and USD750m 8.045% subordinated perpetual notes callable in December.
Earlier in July, FWD Group raised HKD 3.5bn (c. USD445m) in an IPO, using the proceeds to strengthen its capital position and potentially reduce debt. The group’s pro forma leverage ratio improved to 23% at 1H25, down from 25.5% at the end of 2024.
In terms of financials, the group reported a 21% YoY increase in value of new business (VNB) to USD506m in 1H25, driven by strong performance in Bancassurance and Brokerage/IFA channels. Net profit also rose significantly to USD 47m, up from USD 3m a year earlier. The capital coverage ratio stood at a robust 283% as of end 1H25, improving from 260% in 2024.
For fair value, we include the existing FWD Group (FWDGHD, Baa2/BBB-) 7.635% 2031 subordinated bond as well as regional subordinated peers such as Tongyang Life Insurance (Baa2/NR/BBB), Nanshan Life (NR/BBB+/BBB), and Shin Kong Life Singapore (NR/BBB/NR), among other higher-rated issuers. The FWD Group senior bond is also included for reference.
Using the existing FWDGHD bond as a reference point, we assume the new issues will trade about 5-10bp wider than the higher rated, mid-BBB peers, Tongyang Life Insurance and Shin Kong Life Singapore - fair value is estimated around z+205bps (T+167bp) for the 5Y tranche and around z+245bps (T+192bp) for the 10Y tranche.
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AUSSIE 10-YEAR TECHS: (U5) Follows Fade in Treasuries
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 15:17 BST Aug 15
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed both the recent poor NFP print as well as Tuesday’s inflation number. While this impact faded into the close of the week, 10-year futures remain toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
FOREX: USD Index Pinned to 50-dma as Putin Shakes Hands with Trump
- USD slipped against all others Friday, with a poor set of retail sales and Uni of Michigan sentiment numbers meeting a higher-than-expected import price index to further stimulate concerns over a stagflarionary phase in the US economy. The USD Index trades either side of the 50-dma which, notably, has begun to flatten out after maintaining a solid downtrend throughout 2025.
- JPY is the strongest currency in G10, extending the breakout and bearish conclusion of the consolidation phase in USD/JPY. Recent weakness puts the price through support drawn off the early August lows as well as 146.71, a key retracement. Price action this week marks a full reversal of the previously overbought condition, keeping the downside argument in focus.
- Anticipation ahead of the Putin-Trump meeting has reached fever pitch. Footage showing the Presidents shaking hands in Alaska has helped ease concerns over a hostile meeting, but it's the outcomes that will matter to markets - particularly as equities hold at alltime highs. Any signs of progress toward a ceasefire would be warmly received by risk sentiment - although both Trump and Putin cautioned against a optimistic outcome in comments to press.
- We noted earlier in the week the pressure building on USD/HKD, with price action not matching the pattern of HKMA intervention. That move extended overnight, and is still building at typing, putting spot down to new pullback lows of 7.8119 shortly after the European open. Overnight swap rates have surged further still Friday (hitting 1.7% at typing), well ahead of the 0.3% prevailing rate mid-week and should continue to support a recovery in HIBOR fixes ahead. Today's 1m HIBOR fixed higher by 41bps, hitting 1.45% for the highest fix since mid-May. It's these factors that should work against the HKD carry trade (selling HKD, buying USD), evident in the further tightening of the HKD forward discount today: down 975 points from as high as 1270 this month.
- Focus in the coming week shifts to Jackson Hole and Powell's comments on Friday. With the September meeting still in flux - any conviction toward tipping the board toward a rate cut at the next FOMC will be carefully watched, but it's a hawkish outturn that could be more consequential for markets, as OIS prices a near 90% chance of easing on September 17th.
MNI: US TSY TICS NET FLOWS IN JUN +$77.8B
- MNI: US TSY TICS NET FLOWS IN JUN +$77.8B
- US TSY TICS NET L-T FLOWS IN JUN +$150.8B
