Market Cautious Amid Heavy US Data Week; HLA on Developing Outlook

5 July 2016

Credit Markets Update

Market Cautious Amid Heavy US Data Week; HLA on Developing Outlook

¨      APAC USD Credit Market: Credit markets remained on the sidelines ahead of US June FOMC meeting minutes release (Wed) and the key June NFP and unemployment data (both on Friday). The iTraxx AxJ tightened 3.2bps to 137.2bps or its lowest level since mid-Mar16, driven by CDS spread tightening seen in Asian high grade corporates/FIs such as PETMK, Swire Pacific, OCBC and Bank of India, along with modest advances in Asian equities. Elsewhere, US Treasury markets were closed yesterday for the US Independence Day holiday. In the primary market, Yunnan Metropolitan Construction Investment Group (NR/NR/BBB+) may price USD 3y benchmark bonds later today with IPT at +290bps area.

¨      SGD Credit Market: Ezra to deleverage via USD166m vessel divestment. There was a mild move in the short-to-mid swap curve, with the 5y rising 1.8bps to 1.67% while the 2y mildly rose 0.6bps to 1.34%. Interest was seen in yielder names such as EZISP perp after its rights issue exercise last week, as well as EZRASP. Ezra (NR) announced that it was divesting its stake in a floating production, storage and offloading (FPSO) vessel for USD166.3m, with the proceeds targeted to reduce leverage. Ausgroup (NR), which technically defaulted via breaching its financial covenant in May-2016, has proposed a 2y maturity extension of their current outstanding SGD110m AUSGP 10/16, while committing to the coupon payments.

¨      MYR Credit Market: Thinner flows in MYR bond markets after the strong rally last week. Trading volume for both govvies and corporate market were slower at c.MYR2.8bn, relative to the daily average of c.MYR9bn last week. MGS curve steepened with the MGS3y slipping 6bps lower to 2.98% while the 10y rose 1bp to 3.69%. USDMYR stayed supported at the 3.99 level. Over in the corporate market, DanaInfra 4/21 saw MYR80m of trades as yields fell 0.9bp to 3.861% while IESB ’19-’20 declined 0.7-0.9bps to 4.078%-4.399%. Jambatan Kedua (GG) is looking to issue up to MYR1.8bn with 10y and 15y tenure for refinancing. Elsewhere, RAM has placed Hong Leong Assurance (HLA) on developing outlook following Hong Leong Financial Group’s plan to divest its insurance units. In addition, the rating agency also views that Maxis Broadband’s new MYR10bn Sukuk will have no rating impact on the AA3/stable rating of BGSM Management as the ultimate debt level are expected to remain unchanged post its internal reorganization exercise.