Weak Demand for MYR4.0bn 5.5y MGS 11/21; Three Indian Banks Downgraded by S&P

31 May 2016

Credit Markets Update

           

Weak Demand for MYR4.0bn 5.5y MGS 11/21; Three Indian Banks Downgraded by S&P

¨      APAC USD Credit Market: Quiet session in credits as Asian CDS tilted lower by 0.7bps to 140.3bps, while IG spreads and speculative bond yields were unchanged at 210.2bps and 7.14% respectively. The US Treasury market was closed on Monday for the Memorial Day Holiday, though investors can look forward to tonight’s release of the US Apr PCE Core expected at 1.6%, alongside Apr personal income and spending prints expected at 0.4% and 0.7% respectively. Elsewhere, S&P dropped Bank of India and Syndicate Bank to non-investment grade credits, slashing their ratings to BB+ from BBB-/stable; Indian Overseas Bank was cut to BB/stable from BB+, with S&P citing weak asset quality and high credit costs for the 3 banks mentioned above, amid tough operating conditions in the Indian corporate sector.

¨      SGD Credit Market: GSH Corp prints 3y; S&P withdraws Soilbuild rating. There was a 7-9bps widening in the short-to-mid SOR curve, with the 2y and 5y closing at 1.78% and 2.15% respectively. Brent oil prices continued to hover steadily around the USD49/bbl handle, with interest in HY names like BTHSP & GALVSP as well as property papers such as CAPITA & CITSP. Meanwhile, Soilbuild Business REIT (Baa3/Sta) requested the withdrawal of its BBB-/Sta rating by S&P, with only its existing Moody’s rating remaining. In the primaries, GSH Corp Ltd (NR), a property developer with interest in Singapore and Malaysia, is printing a SGD3y at initial guidance of 5.25%.

¨      MYR Credit Market: The new 5.5y MGS 11/21 received the weakest demand this year with BTC of 1.42x, averaging at 3.62%. Sentiment was bearish driven by the weakening MYR to 4.1163/USD (+0.9%) following Yellen’s hawkish remarks last Friday. MGS curve steepened with the 5y and 10y increasing 2-3bps to 3.46% and 3.92%, while 3y settled flat at 3.24%. Moderate flows of MYR400m were seen in the corporate market. Sime Darby Pc26 closed flat at 5.35% on MYR106m trades; while PLUS 1/27 rose 6bps to 4.538%.