Friday, March 17, 2017

¨ UST bear steepened, erasing Fed-fueled gains on Wednesday amid steeper decline in UK

17 March 2017

Credit Markets Update
TBE Issued MYR800m Perp for Refinancing
MYR Credit Market:
¨      Govvies rallied on less hawkish Fed. MGS curve bull-flattened as yields declined across the curve with the 3y falling 2bps to 3.42% while 10y slipped 7bps to 4.08%. MGS 9/17 remained highly traded with a volume of MYR1.5bn, ending the day lower at 3.33% (-6bps from the last traded the previous day). The GII sphere stayed muted with merely MYR243m exchanging hands throughout the day. The MYR strengthened 0.24% to 4.438/USD amid the weakening of the greenback.
¨      Quasi government bonds dominated corporate activities. Volume totalled MYR818m yesterday. Yields for short-tenure quasi government bonds generally inched higher – Cagamas ’17-18 settled at 3.70-3.97% (-1bp to 9bps) on combined MYR185m trades, PASB 6/17 rose 5bps to 3.49%, while Khazanah 3/20 increased 2bps to 4.06%. New issuance AMMB Hldg T2 3/27c22 transacted at 5.00%, 20bps below the coupon. Affin Bank T2 2/27c22, which was issued last month, also closed firmer at 5.245% (c.21bps below coupon).
¨      Tanjung Bin Energy Sdn Bhd (TBE) issued non-rated MYR800m Pnc7. The perpetual unrated Sukuk is backed by an unconditional and irrevocable subordinated cash deficiency support from the Obligor, Malakoff Corp. The proceeds from the issuance are earmarked for partial redemption of MYR1.29bn Junior Term Loan.
APAC USD Credit Market:
¨      UST bear steepened, erasing Fed-fueled gains on Wednesday amid steeper decline in UK bonds as the Bank of England released a somewhat hawkish statement, despite maintaining status quo on interest rate. 2y USTs yield edged up to 1.33% (+3.3bps), while 10y bond rose by 4.7bps to 2.54%. The US economic data released yesterday showed housing starts data moved to a four-month high in February (actual: 1288k, consensus: 1264k), as a result of tighter job market and improved finances. Initial jobless claims data was slightly higher than expectation (actual: 241k, consensus: 240k). The DXY index was down by 0.38% to 100.36. Looking ahead, industrial production and University of Michigan sentiment data will be released later tonight.
¨      Over in Asia, iTraxx AxJ IG index fell by 3.5bps to 89.8bps, with lower CDS spreads seen in Bank of China Ltd, Reliance Industries Ltd and PETMK. PETMK’s CDS spreads were largely unaffected by the modest decline in its FY16 earnings amid lower crude oil prices. The IG space was a tad wider at 171.8bps (+0.2bps); the HY credit spreads lost 6.2bps to 6.57%.
¨      In primaries, APA Pipelines Ltd (issue rating: NR) priced USD850m long 10y at T+185bp, against its IPT at T+200bp area. Elsewhere, Fortune Star (BVI) Ltd. (issue rating: NR/BB/NR, guarantor: Fosun International Ltd) sold USD800m 5NC3 bond at 5.25%, compared to its IPT at 5.5% area. Scentre Mgmt Ltd (issue rating: A1/NR/NR) issued USD500m 10y bond at T+130bp, against its IPT at T+150bp area.
¨      Moody’s revised Beijing Enterprises Holdings Ltd’s (BEH) outlook from negative to stable in order to reflect that the company’s parent Beijing Enterprises Group Co. Ltd (BEG) will maintain its credit profile and Moody’s expectation that BEH’s financial performance to improve over the next 12-24 months.

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