Dovish Yellen Keep Bonds Stable; Ascendas Prints SGD130m 5y at 2.655%; 15y MGS Reopening in Focus

30 March 2016

Credit Markets Update

           

Dovish Yellen Keep Bonds Stable; Ascendas Prints SGD130m 5y at 2.655%; 15y MGS Reopening in Focus

¨      APAC USD Credit Market: Stable as the iTraxx AxJ IG tightened 1.1bp lower to 151.9bps, whereas IG spreads were slightly higher (+0.6bps) at 220.6bps, while the non-IG yields remained firm at 7.66%. Fed Chair Janet Yellen’s dovish rhetoric drove UST yields lower after stressing a need for a cautious approach to rate hikes, with the 10y and 2y settling 8bps tighter at 1.80% and 0.78% respectively. Separately, Fitch slashes Yingde Gases ratings to B+ from BB with a stable outlook to reflect the persistent weakness in the steel sector, plague by overcapacity and low average selling prices. As a result, the company’s heavy reliance on steel segment, as 70% of its customers are from the steel industry, has led to a material increase in its leverage position with Fitch expecting its FFO/adjusted net debt to remain above 5x.

¨      SGD Credit Market: Ascendas prints SGD5y; Nam Cheong’s contract cancellation. SOR tightened with 2y falling by 8.4bps to 1.56% while the 5y declined 6.9bps to 1.94% as the USDSGD strengthened by 1.13% to 1.354. Property names such as CITSP, AREIT and CCTSP appeared to garner interest while oil prices which broke pass the USD40/bbl level (to USD39.1/bbl) yesterday saw papers like KRISSP and NOLSP trade 5-10bps wider (according to Bloomberg). Nam Cheong announced that it may be pursuing legal redress after a client cancelled on a sales contract for an accommodation vessel, which is worth around USD42m. In the primary, Ascendas REIT (A3/NR/NR) printed a SGD130m 5y at 2.655%.

¨      MYR Credit Market: Market to be supported by dovish Yellen’s speech. MGS moved sideways with the 10y clinching 1bp lower to 3.85% as market was cautious before Yellen’s speech to The Economic Club of New York. The WI for 15y MGS 6/31 was seen quoted at the previous day level of 4.30/4.20%. USDMYR closed 0.38% firmer at 4.00 as USD weakened on softer US personal income and spending numbers. Meanwhile, corporate market was actively transacted with MYR1.2bn trading volumes. Notably, Cagamas 8/16-10/25 fell 4-29bps to 3.266%-4.45% on combined MYR226m trades. We expect the local bond markets and currency to be supported in near term following the Fed’s Chairperson dovish rhetoric on the next rate hikes.