Corporate Bond
Weekly Update
Market update
Page 1
US monetary policy and the timing of the
first rate hike since 2006 remains the
dominant theme in bond markets
Market movers
Page 2
With conventional bond yields at recordlow levels, investors have been looking
towards hybrid perpetual bonds. We take
a look at some of the most compelling
options
8/26/2015
9/13/2013
CORPORATE BOND
WEEKLY UPDATE
SERIOUS TRADING WORLDWIDE
www.saxobank.com
September rate hike a coin toss
With the next monetary policy decision for the Federal Reserve less
according to the market
60%
than a month away, markets are still guessing if it will involve a rate
50%
hike, which would be the first rate move since 2008 and the first hike
40%
since 2006! However, there are still a host of uncertainties that could
30%
20%
July
6
July
17
July
28
Market update
Aug
7
Source: Bloomberg
affect the decision. The overriding concern in our view must be the
low inflation outlook, which is bound to be contained by the
continued decline in commodity and especially oil prices as well as
the new devaluation threat from China. This could make the central
bank postpone its decision, or at the very least, lead to a less
Brazilian CDS spiking amid
aggressive tightening cycle than otherwise expected.
political chaos and protests
Impeachment calls are at a high for the newly elected Brazilian
president, following several vocal demonstrations this past week.
President Dilma Rouseff has been struggling with record low support
in the wake of a widespread corruption scandal involving several
government-owned companies and the worst economic downturn in
many years. Credit spreads for both government bonds and corporate
bonds have expanded substantially, but the prospect of a change in
government
Source: Bloomberg
Look out for…
The following events could be worth
towards
a
more
market-
and
reform-oriented
administration could be the right medicine for the country - and thus
constitute an investment opportunity for investors.
Corporate bond spreads in 2015
keeping an eye out for:

Thursday:
Q2 GDP (US)

Tuesday:
HSBC PMI (China)
Manufacturing PMI (Germany,
France and Eurozone)
ISM Manufacturing (US)
Source: Bloomberg
Saxo Bank A/S — Philip Heymans Allé 15 — 2900 Hellerup — Denmark
Phone: +45 3977 6444 • E-mail: fixedincome@saxobank.com
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CORPORATE BOND
WEEKLY UPDATE
SERIOUS TRADING WORLDWIDE
www.saxobank.com
Latest updates on
TradingFloor.com
At TradingFloor.com, you will find
the latest updates on financial
markets and the bond market,
Market movers
With conventional bond yields at record-low levels, investors have been
looking towards hybrid perpetual bonds. Meanwhile, companies are taking
advantage of new accounting opportunities, allowing them include these
bond issues as equity capital.
including morning updates and video
Two of the largest European airlines have recently taken the opportunity
blogs.
to issue new hybrid and perpetual bonds. AIR FRANCE-KLM issued in April
a new bond in EUR with the first redemption option in 2020 with a coupon
of 6.25%. After a strong start to the secondary trading the bond is now
trading at a price of around 97 with a yield of 6.9%. German LUFTHANSA
followed up on the competitor's issue with a new EUR bond, which has the
first redemption option in 2021 and a coupon of 5.125%. The issue has
been fairly stable at a price of around 100 since it was launched earlier in
Bond inspiration
Remember to browse through our
updated inspiration lists containing a
selection of interesting bond
investment opportunities available at
Saxo Bank:
August.
The financial sector has historically been frequent issuers of hybrid capital
because of the major regulatory focus on capital optimisation. The two
large French insurers AXA and GROUPAMA are examples.
Back in 2013, AXA, which sells both life insurance and property and
casualty policies, issued a USD bond with a coupon of 5.5% and the first
redemption option in 2019. The bond, with its A3 and BBB ratings by

Europe

Central Eastern Europe

Latin America

Asia & Pacific

Middle East & Africa
redemption option in 2024 and a coupon of 6.375%. The bond, which is

North America
rated BB+ by Fitch, currently trades at a price of around 107.50 with an
Moody's and S&P respectively, is part of the Investment Grade segment of
the bond universe. With a current price of around 102 the bond is trading
with an effective yield of 4.8% to the first call date.
GROUPAMA, which in addition to property and casualty has an extensive
banking business, issued a new bond in EUR in 2014 which had the first
effective yield of 5.3% to the first call date.
Please note that all yields described above are given provided redemption
on the first call date, which can not be guaranteed for these instruments.
Saxo Bank A/S — Philip Heymans Allé 15 — 2900 Hellerup — Denmark
Phone: +45 3977 6444 • E-mail: fixedincome@saxobank.com
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CORPORATE BOND
WEEKLY UPDATE
SERIOUS TRADING WORLDWIDE
www.saxobank.com
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Saxo Bank A/S — Philip Heymans Allé 15 — 2900 Hellerup — Denmark
Phone: +45 3977 6444 • E-mail: fixedincome@saxobank.com
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