Chinese Issuers Flood USD Primary Market; OPEC Meeting Kicks Off

27 September 2016

Credit Markets Update

Chinese Issuers Flood USD Primary Market; OPEC Meeting Kicks Off

¨      APAC USD Credit Market: Asian credit markets weakened. The iTraxx AxJ IG rose 3bps to 119.8bps mostly on the back of wider Korean corporate CDS i.e. SK Telecom (+8bps), GS Caltex (+7bps), KT Corp (+7bps). IG credit spreads and average HY bond yields added 3bps each to 189.2bps and 6.3% respectively. The risk-off sentiment drove investors towards safe haven USTs’ amid the concerns over Deutsche Bank and ahead of the US presidential debate. The 10y plunged -3bps to 1.58%, while 2y lost 2bps to settle at 0.73%. Active primary markets, ICBC Leasing (issue rating: A2/NR/A) sold USD1.4bn bonds in 2-parts; USD700m 3y bond at T+137.5bps (IPT: +155bps), USD700m 5y bond at T+145bps (IPT: +160). Similarly, China National Bluestar (Baa2/BBB/BBB+) sold USD1.1bn bonds in 2-parts; USD500m 3y bonds at T+230bps (IPT: +250bps), USD600m 5y bonds at T+245bps (IPT: +265bps area). Lastly, Shui On Land (Unrated) sells USD250m 3y bonds at 4.5% against IPT at 4.65% area.

¨      SGD Credit Market: OCBC considering divestment options for United Engineers.  The short-to-mid SOR mildly steepened, with the 2y falling by 1bp to 1.32% while the 5y rose 0.5bps to 1.64%. Yields of papers such as SGREIT and LMRTSP traded tighter (according to Bloomberg), while the prices of UEMSP 21 ended lower as OCBC and Great Eastern confirmed that they were reviewing their stake in United Engineers Limited (NR). Meanwhile, Singapore’s Aug Industrial Production came in slightly weaker-than-expected at 0.1% (consensus: 0.5%; Jul: -3.6%).

¨      MYR Credit Market: The govvies market was quiet with minor selling observed towards the 5y-10y of the MGS curve as MYR weakened to 4.13/USD. Investors were probably cautious before various Fedspeaks and International Energy Forum in Algeria this week. Towards the end of the day, the 5y MGS rose 2bps to 3.25% while the 10y increased 1bp to 3.58%. Brent prices increased 3.2% to USD47.3/bbl amid news on Saudi Arabia offered to cut production in exchange for Iran freezing output. Corporate volume totaled at MYR788m, boosted by MYR210m trades on short-dated Khazanah’s discounted papers. Khazanah 12/16 and 7/18 jumped 15-29bps higher to 3.30% and 3.35% respectively. Elsewhere, Danainfra ’23-45 ended mixed at 3.94-4.86% (-15bps to 2bps).