Chinese Primary Supply Influx; Tata Motors Upgraded to Ba1

28 September 2016

Credit Markets Update

Chinese Primary Supply Influx; Tata Motors Upgraded to Ba1

¨      APAC USD Credit Market: Mixed Asian credit markets. The iTraxx AxJ IG and non-IG bond yields were marginally tighter (-1bp) at 120.2bps and 6.29% respectively, whereas IG spreads widened 1bp to 190.3bps. USTs gained (-1 to -4bps lower) overnight on safe haven demand with the exception of the 2y which rose 1bp to 0.74%; the 10y yields slipped lower (-3bps) to 1.56%. Over to ratings, Tata Motors was upgraded by Moody’s to Ba1/Sta from Ba2/Sta on the back of Moody’s expectations of strong sales from its Jaguar Land Rover unit and improving Indian operations. Separately, Weichai Power rating was affirmed by S&P at BBB/Neg, removing it from negative watch premised on an improved leverage profile over the next 12-months. Primaries stayed busy, China Construction Bank (A1/NR/NR) via its HK branch priced USD600m 3y bond at T+92.5bps (IPT: +110bps). Chinese property developer Fantasia Holdings (Baa2/BBB/BBB+) sold USD400m 5nc3 bond at 7.375% (IPT: mid-7% area). Jinan West (NR/BBB/NR) sells USD300m 5y bond at T+220bps against IPT at T+245bps area.

¨      SGD Credit Market: Primary space quieter after last week’s stronger prints. There was a bear flattening in the SOR curve, led by the 2y which rose 2.5bps to 1.35% while the 5y increased 1.4bps to 1.65%. Papers such as LMRTSP, KEPSP and FCTSP appeared 2-5bps tighter (according to Bloomberg). The primary space continues to look quiet this week after last week saw 3 prints totaling SGD450m, the highest number of prints in over 2 months.

¨      MYR Credit Market: Corporate market breached MYR1bn trades. SDB was the most active at combined MYR130m trades with tranche 5/17 and 8/19 crossing flat to -6bps at 4.07% and 4.62% respectively; while PTP 9/20 fell 2bps to 3.69%. Activity in the benchmark govvies remained muted as investors’ attention were shifted towards the OPEC informal meeting in Algeria for any measures to stabilize the oil prices; along with the US Presidential debate. Brent settled -3% lower to USD45.97/bbl. At the end of the day, the 3y MGS rose 6bps to 2.85%, the 5y-10y declined 1-2bps, while MYR strengthened 0.1% to 4.125/USD yesterday. Meanwhile, tender for MYR2.0bn 20y GII 10/35 will be conducted on the 29-Sep, with the WI was seen quoted at 4.31/23%.