26 July 2016
Credit Markets Update
¨ Asian Credits Remain Resilient; Kookmin Bank Priced USD500m 3y Bonds
APAC USD Credit Market: Asian bonds rally as IG spreads and average speculative bond yields tightened 3-5bps to 196.9bps and 6.3% respectively as investors turned vigilant ahead of the upcoming central bank meetings (BOJ and FOMC), whereas Asian CDS remained flat at 119.2bps and Asian equity markets closed mixed. On the other hand, benchmark UST yields were mostly higher with the short-to-belly increasing by 2-3bps, however the longer ended 10y and 30y were marginally weakened at 1.57% and 2.28% respectively, mainly driven by poor reception to the UST 2y auction, weaker US equities and falling oil prices (Brent: -2.1% to USD44.7/bbl). In the primary front, Kookmin Bank (A1/A/A) priced USD500m 1.625% 3y bonds at T+87.5bps against IPT of +105bps area (BTC: 3.2x). Glenmark Pharmaceuticals (NR/BB/BB) received 8.5x BTC for USD200m 5nc3 bonds sold at 4.5%; IPT at 5% area. Elsewhere, Indonesia’s national O&G company, PT Pertamina (Baa3/BB+/BBB-) may issue up to USD1.5bn bonds, potentially to raise funds for overseas acquisitions i.e. Russia and other countries.
¨ SGD Credit Market: CPI contracted less than expected; NPL and SIBOR dampen bank earnings expectations. SOR closed higher, with 2y adding 3.5bps to 1.48% and 5y settled up 4.0bps to 1.75%, while the SGD closed at 1.3623/USD after CPI contracted 0.7% YoY in June, less than the -1.1% consensus and -1.6% prior. Banks were in focus ahead of earnings releases by OCBC and UOB on 28-July and DBS on 8-August. OCBC Tier-1s ended sideways, while DBS 1/28c23 B3T2, DBS Pc6/19 AT1 and DBS 1/21 senior had better sellers. Foreign banks also changed hands, particularly BOCOM 7/17 senior after announcing plans of overseas expansion and WSTP 8/27c22 B3T2 and WSTP 4/25 ahead of its NZD250m 10nc5 sub offering. Elsewhere, NOLSP 19-21 tightened as takeover by CMA CGM nears conclusion, and AAREIT 16-19 closed range bound after flat DPU growth in 1Q16 and securing SGD100m term loan facility. Elsewhere, Singapore IP data is expected to slow to 0.5% YoY in June, from 0.9% prior.
¨ MYR Credit Market: Markets were quiet before FOMC. Govvies moved mixed in thin trading volume of MYR2.2bn with the 3y inching 1bp higher to 2.88%, while the 10y fell 3bps at 3.62%. The MYR weakening trend continued, closing at 4.066/USD (+0.2%) as Brent price slid below USD45/bbl. Malaysia CDS rose 4.5bps to 139.5bps. Separately, merely MYR157m exchanged hands in the corporate market – notably, KLK 8/25 dropped 5bps to 4.45% on MYR40m trades, while RHBBANK sub-debt 7/24c19 ended the day at 4.495% (-10bps).