Monday, September 26, 2016

APAC Bond Markets Rallied Post-FOMC

26 September 2016

Credit Markets Weekly

APAC Bond Markets Rallied Post-FOMC
¨      Asian credits grind tighter amid the gains in global equities and treasuries market. IG credit spreads and speculative bond yields traded tighter by 5-14bps WoW at 186bps and 6.27% respectively. Asian CDS’ settled at 116.6bps (+3bps WoW) amid the volatility during the week driven higher by Indian corporate CDS (Reliance Industries (+17bps), IDBI Bank (+17bps), State Bank of India (+10bps)). Following the BoJ and Fed inaction last Wednesday, US Treasuries strengthened across the curve (-1 to -10bps WoW) with the 2y at 0.75% and 10y at 1.62%.
¨      Over to ratings, Moody’s upgrades Genting Singapore to A3/Sta from Baa1 premised on its strong liquidity position and declining debt levels, despite the challenges in the Asian gaming industry. S&P upgraded SGSP Australia Assets Pty Ltd (SGSPAA) and its subsidiary Jemena Ltd’s rating A- from BBB+ as it views SGSPAA as a strategic subsidiary of State Grid International Development, providing it with a 1-notch rating uplift. On the other hand, S&P puts Sri Rejeki’s BB- rating on negative watch as it assess the impact of the debt-funded expansion at its sister company, PT Rayon Utama Makmur (construction of a 80,000 ton rayon plant in Indonesia).
¨      APAC primary markets were unfazed by the key central bank meeting with USD9.6bn deals priced against USD3.3bn in the earlier week. Chinese names dominated this space with deals from China Cinda Asset Management (B1/NR/NR), Sinopec Group (Aa3/A+/A+), Country Garden (Ba1/BB/BB+) and Dongxing Securities (NR/NR//A-).
¨      Primary space picks up due to real estate prints. The primary space picked up last week with a collective SGD450m prints, led by UOL Group Ltd (NR) with a SGD240m 4y at 2.50%, Lippo Malls Indonesia Retail Trust with an inaugural perpetual SGD140m Pnc5 at 7.00% which received a BTC of around 2.5x while Starhill Global REIT (-/BBB+/-) issued a SGD70m 10y at 3.14%. YTD issuances are at SGD17.2bn, around 10.3% lower if compared to a similar period last year. REIT names appeared to be favoured as papers like FCTSP, AREIT and SUNSP traded tighter (according to Bloomberg) while GENSSP saw mixed interest as Genting was upgraded to A3/Sta by Moody’s due to its strong net cash position. Marco Polo Marine (NR) and Rickmers Trust Management (NR) officially announced their individual restructuring efforts for bonds outstanding, which encompass a SGD50m MPMSP 10/16 and SGD100m RMTSP 5/17. The former lengthened its maturity by 3 years and provided some underlying security to bondholders while the latter is proposing a SGD60m redemption for an equity stake (subject to existing equity holders approval) while remaining SGD40m will see maturity extended by 6.5y.
¨      SORs dip post FOMC no hike decision. There was a decline in the short-to-mid benchmark swap curve, with the 2y falling by 12.3bps to 1.33% while the 5y dipped 14.8bps to 1.64% post the Sept FOMC which decided on a rates status quo decision. Looking ahead, key data releases include the Singapore Aug Industrial Production (26-Sept) and Sept PMI (3-Oct).
¨      Govvies rallied amid stronger MYR post-FOMC. The MGS curve bull steepened with the 3y falling 10bps to 2.86% as MYR strengthened 0.4% to 4.1135/USD. On the macro, Malaysia foreign reserves stayed stable at USD97.7bn as at 15-Sep, which cover 8.1 months of retained imports and 1.2 times of short-term external debt. Corporate market was active with MYR4.8bn exchanging hands over the week. About a third of the trades were focused in the government guaranteed bonds, notably in Danainfra complex (MYR485m). Followed by infrastructure names – MEX II declined 1-3bps to 4.76-5.50% across tranche ’26-‘34 ; while PLUS ’23-37 ended mixed at 4.05-4.81% (-17bps to +4bps).

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