RHB FIC Credit Market Update - 17/2/16

17 February 2016

Credit Market Update

           

BOI and IOB on Negative Outlook; New 7.5y MGS Attracts 1.63x BTC at 3.80%

¨      APAC USD Credit Markets: The iTraxx AxJ IG inched 3bps lower to 165.5bps whereas IG spreads stood pat at 174bps as tightening of CNOOC ’20, SINOPE ’20, FRANSH ’21 and Yuexiu ’23 were countered by widening of HKLSP ’22, CHIOLI ’20 and FI seniors such as ICBC ’20 and IDBI ’20. Yields of junk-rated credits declined 8bps to 11.87%; gainers include Parkson ’18, China Oil ’18 and Vedanta ’16-23. Benchmark UST curve steepened as the 2y-7y were little changed while yields of 10y-30y edged 2-4bps higher with 10y at 1.77% as demand steered towards IG issuances by Apple’s USD12.0bn and IBM’s USD5.0bn tap. Meanwhile, Brent oil slid 3.6% to USD32.2/bbl despite a pledge by Saudi Arabia and Russia to freeze output as concerns of supply glut failed to ease. On rating actions, S&P placed Bank of India (BOI) and Indian Overseas Bank’s (IOB) at BBB- and BB+ ratings respectively on negative outlook due to weak asset quality and capitalisation. In the pipeline, the Republic of Indonesia (Baa3/BB+/BBB-) may tap the USD market after investor meetings commence from 22 February-3 March.

¨      SGD Credit Markets: After the recent volatility in the SOR benchmark, yesterday’s movement was muted with the 2y and 5y swaps rising by between 1-1.3bps to close at 1.83% and 2.20% respectively. Oil prices hovering over the USD30/bbl threshold at USD32.2/bbl supported some names like IOCLIN and OLAMSP. Meanwhile, Ascendas India Trust (AITSP) announced a bond consent solicitation exercise to remove its liabilities gearing ratio (Total Liabilities/ Unitholders Funds). CapitaLand (NR) reported its 4Q15 net profits which fell 39% to SGD394.6m partially due to increased cost of sales recognized and provisioning for potential losses from the Singapore property space. Meanwhile, the Singapore Jan NODX came in significantly weaker than expected at -9.9% (consensus: -7.6%; Dec: -7.2%).

¨      MYR Credit Markets: New 7.5y MGS attracts 1.63x BTC at 3.80%; DanaInfra and Cagamas most active in secondary. Benchmark MGS moved sideways with the 7y MGS 9/22 slipping 2bps to 3.76% amid the auction of new MYR4bn 7.5y MGS 8/23. MYR closed 0.6% weaker at 4.15/USD as Brent declined 3.6% to USD32.2/bbl despite Qatar, Saudi Arabia, Russia and Venezuela agreeing to freeze output at the January level, thus falling short of expectations for supply cuts. Corporate flows were active with MYR987m changing hands. Among the top traded were DanaInfra 11/45 inched 5bps higher to 5.05%; while Cagamas 2/18-12/22 ended flat to -5bps in between 4.00%-4.40%. On the primary market, Sports Toto (MARC: AA-) priced MYR70m MTN 6/17 at 4.60%.