14 June 2018
Credit Markets Monthly Review
UST and MYR government bond yields continue to head north, rise in yields to again attract better investment entry levels
¨ MYR Credit Market: Trading sentiments for MYR bonds turned a tad more cautious as government bond yields continue to edge higher for both the MGS/GII segment tracking upwardly movement in UST yields as well as recent reduction in non-resident holdings seen in MYR government bonds. However, on a longer term view, we remain constructive of the MYR bond market as the recent upward adjustment in bond yields could again pave the way for better investment entry levels for real money investors. The strong demand seen during the post GE14 tender for the reopening of the 7-year GII 8/25 with a robust BTC of 3.40x reinforces our view that investors’ interest are still aplenty when valuations turns attractive.
¨ APAC USD Credit Market: Banking and financial institutions continue to remain as key issuance sectors in the Asian USD credit space during the month of May. Notable banking and financial institution prints concluded during the period in review include, KEXIM senior unsecured floating rate prints comprising of 3-year and 5-year papers with a combined issuance size of USD1.5bn, with an assigned rating of Aa2 and AA- by Moody’s and Fitch Ratings respectively. Also in the offing was China Merchant Bank rated A3 by Moody’s with a benchmark print size of USD500m. The bonds were issued as part of China Merchant Bank’s EURO MTN programme which was issued with a coupon of 3.075%. Other active issuers tapping the Asian USD credit space include Perusahaan Listrik Negara (Listrik Negara), with another hallmark long-dated 30-year USD1bn print with an assigned rating of Baa2 and BBB by Moody’s and Fitch respectively. The senior unsecured issuance by Listrik, was priced with a coupon of 6.15% and is part of its Euro MTN issue. The issuance window for USD primary space remains active as issuers continue to price their respective funding needs via the bond market ahead of a rising interest rate environment, as the Fed is expected to embark on further interest rate normalisation plans in the 2H18, with upside risks in terms of steeper path to interest rate hikes in 2019 and 2020 based on the Fed’s dot plot projections.