New issue premiums could spike amid US woes

Bond investors could demand higher new issue premiums in the coming days, especially if the US debt ceiling debate remains unresolved triggering risk aversion sentiment.

New issue premiums could spike amid US woes
US President Barack Obama said he would accept a short-term increase in the country’s borrowing authority in order to avoid a crisis.

New bond issuance especially higher beta names could struggle to price competitively in the coming days. The ongoing US debt ceiling debacle could prompt credit investors to demand higher premiums, which are hovering around the 5bp-10bp level, according to experts.

“At the moment, premiums are relatively negligible but, as you move to the end of this week, that may increase a little bit,” said a Hong Kong-based debt syndicate banker to FinanceAsia. “High...

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