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The pulling of Bahrain-based Bank ABC’s $400 million AT1 perpetual bond last week may be a case of “wait and watch” as rising US yields are expecting to continue their growth under US President Donald Trump’s tariff plan.
The bank, which is rated BBB stable by S&P, announced the issuance last week but pulled back as yields were less than initial price thoughts of 8%.
The bank is likely to “wait and watch” along with other lower-rated issuers in emerging markets as the cost of raising funds is increasing and is likely to increase further, according to one advisor familiar with the deal.
The US Treasury yields jumped on Trump’s election victory in November and have been rising over the past week as the President Elect prepared for inauguration.
Yield growth has been attributed to Trump's much discussed tariff plans on goods imported into the US, going as far as to promise a 25% on Mexican and Canadian imports on day one of his Presidency in his final rally prior to taking office.
More expensive imports can lead to higher inflation, which will lead to higher interest rates from the US Federal Reserve, which also tracks US Treasury yields.
“It’s a case of these banks having to give higher yields, which they can’t in every case, or they wait for yields to settle,” the advisor said.
The bank confirmed at the weekend that it dropped the issuance due to market conditions and would reconsider at a later date if conditions become more favourable.
(Reporting by Imogen Lillywhite; editing by Seban Scaria)