Lackluster Market as Investors Waiting for Fed’s Signal

15 June 2016

Credit Markets Update

Lackluster Market as Investors Waiting for Fed’s Signal

¨      APAC USD Credit Market: Markets in risk aversion mode as investors remained cautious ahead of the US FOMC meeting as global equities continue to slide. The iTraxx AxJ added 3.9bps to 149.5bps, led higher by CNOOC, Korea Electric Power and Industrial Bank of Korea (3-5bps), while IG credits spreads and average non-IG bond yields gained another 2.5-5bps to 223.1bps and 6.94% respectively. Over to UST’s, benchmark yields were little changed with the 5y and 10y settled at 1.14% and 1.61% respectively, as the Fed kicked off its two-day policy meeting. Finally, Zhongrong International (NR/BB+/NR) meets with investors today for a planned USD bond deal.

¨      SGD Credit Market: Soilbuild REIT acquires industrial property.  There was a mild flattening in the short-to-mid SOR curve, with the 2y rising by 1.8bps to 1.60% while the 5y was mostly unchanged at 1.88%. Interest was seen in LMRTSP and HPLSP (which was tighter 3-7bps according to Bloomberg) as well as yielder names like EZRASP and NOLSP. Soilbuild Business REIT (Baa3/-/-) is acquiring a light industrial development property for SGD100.5m, which will increase its portfolio size by around 8% from the current SGD1.2bn. Looking ahead, investors will be eyeing the Apr Retail Sales data (consensus: 6.1%; Mar: 5.1%) to be released this afternoon.

¨      MYR Credit Market: Corporate market was active with MYR1.26bn transactions, boosted by the heavy trades of MYR400-415m in Khazanah 8/23 (+2bps to 4.215%) and Cagamas 10/23 (closing flat at 4.22%). Local govvies ended in red with the 3y and 10y increased 2bps to 3.22% and 3.88% respectively. MYR weakened for the 3rd consecutive days to 4.1070/USD along with falling oil prices to USD49.8/bbl, driven by higher US’ oil inventories.