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Monday, 6 September 2021

Desperate for returns, bond investors are buying the junkiest junk they can find

Ultra-low rates are driving investors hungry for yield into the riskiest types of debt, the Wall Street Journal reports. Faced with paltry returns on most speculative-grade debt and tightening spreads, fund managers are buying into corporate debt with the lowest credit ratings — and driving yields down even further in the process. Bonds rated triple-C or lower had offered an extra 2.79 percentage points of spread at the start of the year but thanks to the buying spree, this had dropped to a 20-year low of 1.51 percentage points in July.

Aramco slashes Asia crude prices as production ramps up: Saudi Aramco cut October prices for Asia by more than twice the expected amount in a sign that the world’s biggest oil exporter is looking to compete for a greater market share, Bloomberg reports. Arab Light crude, the company’s main oil grade, has been discounted by USD 1.30 a barrel to a premium of USD 1.70 more than the regional benchmark. With Brent crude up 40% this year and OPEC+ last week deciding to add another 400k bbl/d to the market in October, Aramco seems to be taking a more aggressive line on pricing as it fights to export as many barrels as possible before domestic demand likely drops off in the fall.

Down

EGX30

11,096

-1.8% (YTD: +2.3%)

None

USD (CBE)

Buy 15.65

Sell 15.75

None

USD at CIB

Buy 15.65

Sell 15.75

None

Interest rates CBE

8.25% deposit

9.25% lending

Up

Tadawul

11,335

+0.1% (YTD: +30.5%)

Down

ADX

7,636

-0.2% (YTD: +51.4%)

None

DFM

2,913

-% (YTD: +16.9%)

None

S&P 500

4,535

-% (YTD: +20.8%)

Down

FTSE 100

7,138

-0.4% (YTD: +10.5%)

Down

Brent crude

USD 72.61

-0.6%

Up

Natural gas (Nymex)

USD 4.71

+1.5%

Up

Gold

USD 1,833.70

+1.2%

Up

BTC

USD 51,705

+3.0% (as of midnight)

THE CLOSING BELL-

The EGX30 fell 1.8% at yesterday’s close on turnover of EGP 1.5 bn (0.2% above the 90-day average). Local investors were net sellers. The index is up 2.3% YTD.

In the green: EK Holding (+0.9%), CIRA (+0.2%).

In the red: Egyptian for Tourism Resorts (-11.9%), Orascom Development Egypt (-5.7%) and Pioneers Holding (-4.5%).

Asian markets are mostly in the green in early trading this morning. Futures in Europe suggest markets there will open largely in the red today. US and Canadian markets are closed in observance of Labor Day.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Etisalat Misr (tax ID: 235-071-579), the leading telecoms provider in Egypt; and Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt.