RHB FIC RV AAA - 30/3/16

30 March 2016

Relative Value Ideas: AAA

AAA Curve Bull-Flattened on Strong Technical from SRR cut and Dovish CBs; Laggards in EKVE, GIC and ADCB

Highlights

¨         AAA trading volume rose 46% QoQ to MYR12.3bn in 1Q16 (up to 18 March), topped by mid-tenured GREs namely Rantau ‘19-20, Cagamas ‘18-20, and Putrajaya ‘20, closing 7-29bps firmer at 3.99%-4.27%.

¨         Primary market remained active with MYR6.8bn of AAA issuances, flat vs 4Q15, led by Danga MYR1.5bn 10y at 4.60% (MGS+67bps) and Cagamas MYR1.12bn 3y at 4.10% (MGS+86bps).

¨         AAA indicative yield curve bull flattened as average AAA 10y yields fell 25bps to 4.79% while 5y declined 14bps to 4.38%. Nonetheless, AAA spread to the MGS for the 5y narrowed 12bps to +97bps while 10y widened 14bps to +99bps.

¨         Laggards seen in new prints EKVE ‘15-20 and GIC ‘21-23, while ADCB ‘17 offer diversification exposure to strong GCC bank; Value in Cagamas 8/20 and TELEKOM 6/21.