Weekly Treasury Simulation: 3-Month Bill Rate at Decade-High

The article discusses the weekly treasury simulation and the likely level for the 3-month bill rate in 10 years. According to Prof. Robert Jarrow's book, forward rates contain a risk premium above the market's expectations for the 3-month forward rate. The article documents the size of this risk premium through a graph showing the zero-coupon yield.

Alibaba (NYSE: BABA) has announced a HK$12 billion ($1.5 billion) bond offering, exchangeable into shares of its healthcare unit, Alibaba Health. The zero-coupon bonds, maturing in 2032, come with a 40% to 50% exchange premium over a yet-to-be-finalized reference price. This structure allows investors to hedge their position while Alibaba unlocks value from a strategic asset without a direct equity sale [1].

The bond offering follows a similar strategy employed by Baidu earlier this year, where the company raised $2 billion via Trip.com-linked exchangeables. This approach enables companies to trim stakes in subsidiaries while maintaining upside optionality [1].

For Alibaba, the timing of this bond offering may indicate a shift in strategic focus. By tapping this route, the company may be signaling that it sees better return opportunities elsewhere, particularly in its cloud infrastructure and international commerce business, where proceeds are expected to be reinvested [1].

The deal is being led by JPMorgan, UBS, Citi, and Morgan Stanley. For investors, the structure raises several questions: Will Alibaba Health see enough momentum to hit the premium? Will Alibaba's core bets in cloud and global e-commerce deliver the returns needed to justify the trade-off? This isn't just a capital raise; it could be a signal of what Alibaba sees coming next [1].

References:
[1] https://finance.yahoo.com/news/alibabas-1-5b-bond-move-152947847.html