OPEC Agrees to Preliminary Oil Production Cut

29 September 2016

Credit Markets Update

OPEC Agrees to Preliminary Oil Production Cut

¨      APAC USD Credit Market: New supply fails to excite as Asian credit markets stayed mixed. The iTraxx AxJ IG tightened 2bps to 118.3bps, while IG spreads narrowed marginally to 189.6bps, though non-IG yields rose 2bps to 6.31%. Benchmark USTs yields rose 1-2bps after the OPEC reached a preliminary agreement to cut oil output. UST10y climbed 2bps to 1.57%, while 2y gained 1bp to at 0.76%. New supply continues to pour into primaries, CK Hutchison (A3/A-/A-), sells USD1.25bn bonds in 2 parts, USD750m 5y bond at T+90bps (IPT at +115bps area) and USD500m 10y at T+130bps (IPT: +145bps area). HK property development company, New World Development (NR), sold USD1.2bn Pnc5 at 5.75% (IPT: 6% area). Lastly, HNA Group (NR) priced USD200m 5y bond at 6.25% (IPT: 6.25%).

¨      SGD Credit Market: Potential OPEC production cuts may spur risk-on mode. The SOR curve rose led by the 2y by 1.5bps (to 1.36%) while the 5y increased by 2.9bps (to 1.68%). Names such as OHLSP, GUOLSP and FCLSP appeared 3-8bps tighter. The potential oil production cuts following yesterday’s OPEC meeting may spur some risk-on appetite today, with Brent oil prices rising by close to 6% after the decision was announced. Meanwhile, Dyna-Mac Holdings (NR) has received approval from close to 95% of bondholders for the redemption of its sole outstanding SGD50m DMHLSP 8/17. Looking ahead, Singapore Aug aggregate loans data will be released tomorrow.

¨      MYR Credit Market: Corporate market stayed active with MYR1.5bn exchanging hands. Activities were tilted towards the infrastructure names such as LDF3 (MYR190m) and TBEI (MYR40m). Elsewhere, Danainfra ’23-’45 settled at 3.90%-4.86% (-15bps to +4bps) on combined MYR105m trades. MYR recovers to 4.11/USD this morning, from 4.14/USD yesterday following the overnight rally in Brent oil prices. The WI for MYR2bn 20y GII Reopening was seen quoted lower at 4.29/22%, while MGS curve flattened yesterday with the 3y rising 2bps to 2.87% and 10y falling 2bps to 3.55%.