Pre-FOMC Jitters Weigh on APAC Credits; Agricultural Bank of China Priced USD500m 5y bond at T+145

14 June 2016

Credit Markets Update

Pre-FOMC Jitters Weigh on APAC Credits; Agricultural Bank of China Priced USD500m 5y bond at T+145

¨      APAC USD Credit Market: Market jitters ahead of key central bank meetings this week (US Fed, BoE and BoJ), as global equities markets retreated before FOMC meeting and Brexit Referendum. Accordingly the iTraxx AxJ climbed 4bps to 145.7bps while IG credits spreads and average speculative bond yields added 3-5.2bps to 220.7bps and 6.89% respectively. Elsewhere, Treasuries’ yield fell 1-4bps as investors fled to safe haven assets, as 2y and 10y settled at 0.71% and c.1.61% respectively. On ratings, Moody’s revised Future Land’s outlook to stable; affirmed at Ba3, driven by improved sales, funding access and its adequate liquidity position, despite investigations by Chinese authorities on its controlling shareholder and chairman. Moody’s also confirmed China’s Wanhua Chemical at Baa3/neg to reflect expectations of an improvement in its operating performance with stronger cash flows, and a lower debt/EBITDA of 4.0x over the short-to-medium term from 5.0x in 2015. Turning to primaries, Agricultural Bank of China (A1/A/A) received USD2.1bn orders for its USD500m 5y bond, priced at T+145; IPT at T+170 area, mainly taken up by banks (73%) and fund managers (23%). Lastly, Wuxi Construction (NR/BBB+/BBB+) meets with investors tomorrow for a planned USD bond issuance.

¨      SGD Credit Market: Frasers Centrepoint Trust prints 5y at 2.76%.  The 2y and 5y SOR fell by around 2.7-3.5bps to close at 1.58% and 1.88% respectively. Interest was seen in the REIT space on papers such as SUNSP and FCTSP as well as SCISP and OLAMSP. Pacific Radiance is pursuing arbitration against two China shipbuilders with regards to their failure to deliver two platform supply vessels, with amounts owing including a USD10m pre-delivery installment. In the primaries, Frasers Centrepoint Trust (-/BBB+/-) priced a SGD50m 5y at 2.76%.

¨      MYR Credit Market: Light activities before FOMC meeting. Corporate market started the week on thinner activity of MYR253m, compared to daily average of MYR426m last week. Cagamas 10/23 was most active with MYR100m traded closing 2bps lower at 4.22%. In the govvies market, short-term off-the-run MGS dominated the trading flows, notably MGS 10/17 increased 5bps to 2.90%. Activity on the MGS benchmarks were muted with the 3y settling flat at 3.20%, while the 10y declined 1bp to 3.86%. MYR closed 0.4% weaker at 4.0877 against the greenback.