Bond Market Monitor: Fed funds rate projected to fall in 2024

Important Events

• Last Tuesday, the United States Bureau of Labor Statistics released the inflation data for November 2023, with headline inflation falling slightly to 3.1% year-on-year (“YoY”), down from 3.2% figure in the previous month. However, core inflation remained constant at 4%, while the monthly consumer price index had risen by 0.1% month-on-month (“MoM”) in November.
  
  
• Last Wednesday, the United Kingdom Office for National Statistics announced that the monthly GDP for UK had fallen by 0.3% MoM in October 2023. This reversed the growth observed in the previous two months and came below the market expectations of a flat reading. For the three months to October, UK’s economy saw zero growth across the quarter.
  
  
• Last Wednesday, the Federal Reserve decided to keep the Federal Fund Rates unchanged between the range of 5.25% to 5.50% for the third time. The Federal Open Market Committee statement highlighted that it will continue to review ongoing economic data prior to making further decisions.
  
  The latest economic projections were also released in this meeting, with adjustments observed on the projected inflation and Fed funds rate. Headline inflation is projected to fall to a median of 2.4% in 2024, previously at a median of 2.5%. The Fed funds rate is projected to fall to a median of 4.6% in 2024, as compared to the previous value of 5.1%.
  
  
• Last Thursday, the Bank of England (“BoE”) made the decision to keep its benchmark interest rate at 5.25% for the third consecutive time. The BoE indicated that the monetary policy will likely need to be kept restrictive for an extended period of time, while further tightening remains possible in the event of more persistent inflationary pressures.
  
  
• Last Thursday, the European Central Bank (“ECB”) decided to maintain its three key interest rates and announced the plan to discontinue reinvestments under the pandemic emergency purchase programme (“PEPP”) at the end of 2024. The ECB has also reflected that it would keep rates at sufficiently restrictive levels for as long as necessary and further decisions will continue to follow a data-dependent approach.
  

Asian High Yield Bond Index

• The Barclays USD Asia High Yield Bond Index rose by 1.41% for the week ended 15 December 2023.
  
  
• On Wednesday, Seazen successfully issued a 3-year onshore bond of up to RMB 850m in total. The bond is fully guaranteed by China Bond Insurance Co.
  
  
• On Wednesday, Longfor plans to issue a 3-year onshore bond of RMB 1.2b with a price guidance of 3.4-4.4%. The bond is fully guaranteed by China Bond Insurance Co.
  
  
• On Wednesday, Country Garden has repaid the principal of an onshore bond on 13 December, with a total amount of RMB 800m.

Interest Rates and Currencies

• The US dollar depreciated against the Singapore dollar last week with the USD/SGD currency pair closing at 1.3327. The 2-year Singapore Overnight Rate Average-Overnight Index Swap (“SORA-OIS”) decreased by 5 basis points to 2.9050%, the 5-year SORA-OIS decreased by 10 bps to 2.6550 % and the 10-year SORA-OIS decreased by 11 bps for the week to 2.6550%.

• Last week, the yield of 2-year US Treasuries (“UST”) decreased by 28 bps to 4.4428% while the 10-year UST yield saw a decrease of 31 bps to 3.9110%.

Corporate Updates and New Issues

• On Monday, LMIRT Management Ltd (“LMIRT”) announced that LMIRT has obtained a secured amortising term loan facility of up to IDR 2,500,000,000,000 (approximately SGD 215,572,993) with an average life of approximately 6 years. As the loan facility requires consent from the medium-term noteholders, LMIRT is seeking to obtain consent solicitation from the bondholders, while concurrently hold a tender offer for LMRTSP 7.250% 19Jun2024 Corp (USD) and LMRTSP 7.500% 09Feb2026 Corp (USD).
  
  
• On Monday, Wing Tai Holdings Limited (“Wing Tai”) announced that its wholly-owned subsidiary Wincrown Pty Ltd has entered into a contract of sale with CitiPower Pty Ltd to acquire 11-27 Tavistock Place, Melbourne, Victoria 3000 for a total consideration of AUD 28m.
  
  
• On Monday, Keppel Infrastructure Fund Management Pte. Ltd. (“KIT”) announced that it has obtained a multicurrency revolving loan facility of SGD 50m.
  
  
• On Monday, Keppel Corporation Limited (“Keppel”) announced that it has signed a memorandum of understanding with AM Green, wholly-owned and controlled by the founders of Greenko Group, to jointly explore opportunities to produce biogenic carbon-based sustainable fuel.
  
  
• On Tuesday, Sembcorp Industries (“Sembcorp”) announced that its wholly-owned subsidiary, Sembcorp Solar Singapore, was awarded a tender by JTC to solarize interim vacant land and rooftops of five buildings on Jurong Island with a contracted capacity of 80MW.
  
  
  In another announcement on Thursday, Sembcorp announced that its wholly-owned renewables subsidiary Green Infra Wind Energy Limited has received the letter of award from NHPC Limited, an enterprise of the Government of India, to develop a 300MW Inter State Transmission System connected solar power project. The project is expected to be ready for commercial operation in 2026, and will be funded through a mixture of internal funds and debt.
  
  
• On Wednesday, Mapletree Logistics Trust Management (“MLT”) announced the proposed acquisition of a modern Grade A warehouse located in Farukhnagar, Delhi NCR, India for approximately SGD 14.5m. The proposition acquisition is expected to be 100% funded by debt and to be completed by 4Q FY23/24.
  
  
• On Wednesday, StarHub Ltd (“Starhub”) announced that its subsidiary company, Keele Investments Pte. Ltd., has entered into a conditional sale and purchase agreement with ST Engineering Info-Security Pte. Ltd. to divest 100% of the issued and paid-up share capital of D’Crypt Pte. Ltd. The estimated consideration is about SGD 87.4m.
  
  
• On Friday, Singapore Airlines Limited (“SIA”) announced the operating results for November 2023. The total number of passengers carried rose YoY from 2.41m in November 2022 to 3.09m in November 2023, while the passenger load factor increased by 1.9 percentage points across the same period. The cargo load increased by 5.8% YoY, with the cargo load factor increasing by 1.9 percentage points as well across the same period.
  
  
• On Sunday, CapitaLand Ascott Trust (“CLAS”) announced that it will be divesting three hotels in Osaka, Kapan to an unrelated third party for a total of approximately SGD 99.8m. The three hotels are Hotel WBF Honmachi, Hotel WB Kitasemba East and Hotel WBF Kitasemba West. 

Our podcast series, Yield Hunters, is available on Spotify, iTunes Podcasts and Google Podcasts. We share our thoughts on new bond issues and hold discussions on the fixed income space. Listen to our latest episode below and follow us!