Market Watches Key June NFP and Employment Data; Australia’s Big Four Banks on Negative Outlook

8 July 2016

Credit Markets Update

Market Watches Key June NFP and Employment Data; Australia’s Big Four Banks on Negative Outlook

¨      APAC USD Credit Market: IG credit spreads and average speculative bond yields tightened 3bps to 214.2bps and 6.48% on improving investor confidence while, Asian CDS was stable at 140.7bps. On the other hand, 2-10y USTs rose 1-2bps on upbeat June ADP payrolls at 172k (consensus: 160k), ahead of the key June NFP and unemployment data later tonight. Turning to ratings, major Australian Banks i.e. ANZ, NAB, CBA and Westpac banking groups were placed on negative outlook by S&P following the same outlook revision on the Australian sovereign. In the primaries, ICBC (A1/A/A) may price USD 3y benchmark bonds later today with guidance at T+130-135bps; IPT at +150bps area. Furthermore, the Chinese banking group plans to meet with investors next week for a proposed USD AT1 bonds. Elsewhere, the Hong Kong mobile operator HKT (Baa2/BBB/NR), sets final guidance for USD750m 10y bonds at T+170bps with IPT at +185bps area. Among HY names, Huai’An Development (NR/NR/BB+) priced USD300m 3y bond at 5.1% against IPT of 5.3% area and HT Global (Ba3/BB-/BB-), an Indian IT and software company, received over USD1.9bn orders for its USD300m 5nc2 bond, priced at 7.125% (IPT: 7.625%).

¨      SGD Credit Market: Logindo Samadramakmur seeks consent solicitation. The SOR curve flattened, with a 1.7bps rise in the 2y to 1.35% while the 5y was unchanged at 1.63%. Interest was seen in high grade names like CAPITA, STSP and JTCSP as oil price closed lower at USD46.6/bbl. Logindo Samadramakmur (NR) announced that it was seeking consent to loosen the financial covenant of its sole outstanding SGD50m LEADIJ 2/20 which has a guarantee standby letter of credit (SBLC) from UOB. The consent seeks to completely waive the minimum Interest Coverage Ratio requirement until end-2017. Meanwhile, Keppel announced that it has secured four O&M contracts totalling SGD120m, adding onto its SGD8.6bn orderbook as of end-March.

¨      MYR Credit Market: Govvies rallied amid a quiet trading session of MYR2.1bn before the Hari Raya holidays. The GII7y and GII10y were the most active, declined 4-5bps to 3.70% and 3.88% respectively. Corporate activities breached MYR600m led by Cagamas and Tan Chong Motor Holdings (TCMH). Yields for TCMH 11/19 and 11/21 spiked up 125-170bps to 6.098-6.33% following the 2-notch downgrade by RAM to A1 on the 30-Jun. Elsewhere, Cagamas ’18-’20 fell 4-41bps to 3.691-4.057%. On the macro front, Malaysia’s foreign reserves as at 30-June decreased by USD0.1bn MoM to USD97.2bn which covers 8.1 months of retained imports and 1.2 times of short-term external debt.