Credit Market Watch: Summary for week ending 15-May

Credit Market Watch: Summary for week ending 15-May

·         MYR Credit:

Ø  MGS yields were down WoW despite a selloff midweek except for the longer dated bonds which cheapened ahead of the upcoming 20y MGS auction. Our house revised 2015 real GDP growth upwards to 4.9% from 4.5% previously following a 1Q GDP print of 5.6% which is slightly better than consensus.

Ø  PDS market was rather quiet with GGs trading range bound. Trading activity was slightly better on Friday with demand for AAA papers returning on names such as Plus, Telekom and Aman. The AA space saw some buying interest on YTL Power papers with YTL Power'23 tightening 2bps. We have a stable credit outlook on YTL Power despite near term headwinds and suggest a buy if there is good offer.

Ø  Relative value: YTL Power'18, '23 and '24 seem to offer some value last traded 5-12bps above our fitted line.

·         Asian USD Credit:

Ø  UST traded stronger with yields lower by 4-10bps WoW. Sentiment in the Asian credit space improved with the JACI composite 4bps tighter over the week.

Ø  Sovereigns generally gained in prices on the back of UST strength. The MALAYS curve came down by 10-15bps. INDONs and PHILIPs did not perform as well as prices were stronger but the spreads over UST widened WoW. The Government of Hong Kong is having roadshow for USD sukuk issuance.

Ø  IG space saw good two-way flows. Chinese property and financial names were in favour with buyers keen on DALWAN and COGARD. DALWAN was the focus as the company the company announced a strategic cooperation with Vanke on land acquisition and project development which is viewed positively by market.

Ø  New issues of China Minsheng Bank (sold 3y bonds at +145bps) and Agriculture Bank of China (sold 5y fixed at +130bps and 3y fixed at +110bps) performed well, rallying 10-15bps from reoffer. Huawei priced its USD1b 10y unrated bonds at +195bps with reportedly overwhelming USD8.5b orders and was last done >30bps stronger from reoffer.

·         CDS: EM Asia CDS spreads tightened across the board with the Malaysia 5y CDS outperforming narrower by 5bps WoW.