BOJ Surprises by Standing Pat; Cambridge Industrial Prints SGD50m 7y at 3.95%; 7y MGS Reopening Oversubscribed by 2.04x

29 April 2016

Credit Markets Update

           

BOJ Surprises by Standing Pat; Cambridge Industrial Prints SGD50m 7y at 3.95%; 7y MGS Reopening Oversubscribed by 2.04x

¨      APAC USD Credit Market: Wider spreads as Bank of Japan holds off additional stimulus with Asian CDS and IG spreads increased by 0.3-1.4bps to 140.7bps and 213.1bps while average non-IG bonds remained unchanged at 7.34%. Elsewhere, yields of benchmark USTs declined 3-4bps with 5y and 10y at 1.29% and 1.82% respectively. The primary market saw Huawei (NR), via Proven Honour Capital price a USD2.0bn 10y bond at T+230bps, or 10bps inside initial price guidance while China Aircraft Leasing (NR) sold USD300m 3y bond at 5.9% vs. IPT of 6% area.

¨      SGD Credit Market: Cambridge Industrial prints SGD50m 7y at 3.95%. There was a decline by around 5bps in the SOR benchmark, with the 2y and 5y closing at 1.62% and 2.01% respectively. Yielder names such as BTHSP, NOLSP and KRISSP tightened by c.10-15bps (based on Bloomberg) from the risk-on sentiment emanating from the upswing in commodity prices. Cambridge Industrial Trust (Baa3/NR/NR) 1Q16 revenue rose 3.2% YoY to SGD28.4m, though net income declined 6% to SGD13.8m mainly due to fair value derivative adjustments. Its operating profile continues to remain robust, with a longer weighted lease profile of 3.6 years, a moderate occupancy rate of 94.1% coupled with high fixed rate debt of 96.7%. In the primaries, Cambridge Industrial Trust printed a SGD50m 7y at 3.95% which will mainly be used for refinancing purposes.

¨      MYR Credit Market: MGS auction of MYR3.0bn 7y reopening drew a decent BTC of 2.04x at an average yield of 3.80%, while cash market closing 0.7bps higher at 3.807%. Other MGS benchmarks widened by 1-4bps with 3y at 3.28%, 5y at 3.49% and 10y at 3.90%. Corporate flows more than doubled to MYR1.3bn vs Wednesday’s MYR497m, with continued interest into MAHB Pc12/24 (AA2) which ended 4.971% (-3.4bps) following reported 1Q16 EBITDA increasing by 12.2% to MYR452.6m due to higher passenger traffic. Meanwhile, MEX II (AA-) issued MYR150m 19y junior bonds at 6.5%, and MYR1.3bn 5y-18y sukuk at 5.1%-6.4%, proceeds of which will be used for the highway extension of Maju Expressway from Putrajaya to KLIA. MYR appreciated 0.4% to 3.8970 against the greenback.