EM CREDIT SUPPLY: Hanwha Energy USA: New $ deal FV
(HWEUHC, Aa2/AA/-)
New Issue: $benchmark 3y
IPT: T+100bp area (c. z+128bp)
FV: T+65bp area (z+93bp)
Hanwha Energy Corp. subsidiary, Hanwha Energy USA, is coming to the market with a new 3y $ bond. The bond will be guaranteed by The Export-Import Bank of Korea. The existing $300m bond matures in July. Hanwha Energy is a retail energy producer, its US subsidiary is focused on solar power.
In terms fair value, we map the $ curves of the Export-Import Bank of Korea, Korea Development Bank as well as the Industrial Bank of Korea, all of which are rated the same as the Korean sovereign (Aa2/AA/AA-). The issuers, as you might expect, are trading more or less on top of each other. We also add Hanwha FutureProof (HWFPCO, Aa2/AA/-), which is part of the Hanwha group, as well as being guaranteed by the Korea Development Bank.
Hanwha FutureProof is a JV investment company owned equally between Hanwha Solutions and Hanwha Aerospace, headquartered in the U.S. The investment focus is energy sustainability, though we note the recent approval by Australian authorities to increase its stake in Australian defence company, Austal Ships.
We think Hanwha FutureProof acts as a natural anchor to a fair value estimate of Hanwha Energy's proposed 3y deal, given recent issuance, similarly guaranteed by the Korean State and being part of the Hanwha Group. We see fair value at the 3yr at z+93bp (T+65bp area).
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JGB TECHS: (M5) Rallies off Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 139.40 @ 15:42 GMT May 23
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have rallied off recent lows and for now, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US FISCAL: Total Tariff Income Jumping In May As New Rates Hit
Treasury reported a record $16.5B in customs/excise taxes on May 22, reflecting the large increase in tariff rates that went into effect in April.
- Today's report is important because it represents the largest tariff collections of the month which are typically on a due date around the 22nd, when most corporate importers make their payments.
- Thursday's one-day collection is a record, and the month has already set a new record. Tariff revenues have totaled $22.3B so far in May, and are came in at $17.4B in April (after averaging $8.1B/month in 2024).
- For the fiscal year as a whole so far, customs duties have totaled just under $93B, per the Treasury Daily Statement.
US FISCAL: Extraordinary Measures Continue To Dissipate Alongside Treasury Cash
Treasury's latest estimate of the size of "extraordinary measures" available to use "in order to prevent the United States from defaulting on its obligations as Congress deliberate[s] on increasing the debt limit" is down to $67B on May 21 (of an available $299B), vs $82B a week earlier.
- The amount hit the 2nd lowest level since the debt limit impasse started, at $46B, on May 20 (the low was $34B on Feb 24).
- With $476B in cash in the Treasury General Account on May 21, that left the total resources available to Treasury at $543B, the least since April 14 - the day before the annual April 15 tax deadline.
- Treasury Sec Bessent warned Congress earlier this month that "there is a reasonable probability that the federal government's cash and extraordinary measures will be exhausted in August while Congress is scheduled to be in recess. Therefore, I respectfully urge Congress to increase or suspend the debt limit by mid-July".
