AHCA Failure Rallies Market; Eye on FOMC Minutes

3 April 2017

Credit Markets Weekly

AHCA Failure Rallies Market; Eye on FOMC Minutes

SUMMARY:

¨      MYR Credit Market: Govvies market was quiet on risk off sentiment. Trading activities were thin at MYR9.2bn last week as investors stayed cautious amid various Fedspeaks and formalization of Brexit. Local govvies yields increased with the 3y MGS spiking 11bps WoW to 3.53% while the 10y rose 6bps WoW to 4.13%. Focus of the week was the auction of 7.5y New MGS 9/24 which garnered a decent BTC of 2.06% at average yield of 4.059%. The MYR closed flat at 4.4255 against the greenback where early week gain was subsequently offsetted by hawkish Fed members’ comments from Rosengren and William which suggest the possibility of more than 3 rate hikes in 2017.

Corporate News – Primary market remained active. Total issuance was MYR4.1bn this week, bringing the monthly total issuance to MYR20bn. Valuecap (NR) issued MYR1bn 5y at 4.441%, or 11bps lower than the previous similar issuance in Dec-16. Elsewhere, we saw asset backed securitisation from Merdeka Capital, Aldzahab ABS, and Lucida Capital as well as property names such as Mah Sing and Sunway Velocity.  

¨      APAC USD Credit Market: UST yields were lower last week on the back of global risk-off sentiment as the result of President Trump’s healthcare reform setback, which raised concerns over his ability to deliver his fiscal policy pledges, and also the UK officially triggered Article 50 to leave the European Union. The 2y note trickled down to 1.25% (-1bps), while the 10y slipped by 2bps to 2.39%; Steady week for APAC credits; USD7.5bn priced WoW; YTD issuances reached USD85.1bn representing c.34% YoY growth.

Rating Actions - Moody’s upgraded China Aoyuan Property Group Limited’s LT rating from B2 to B1, with stable outlook; Moody’s revised the outlooks of two Chinese real estate players – Vanke Real Estate HK Company Limited and Jingrui Holdings Limited from negative to stable, affirming ratings at Baa1 and B3 respectively.

Table 1: Index Weekly Movements

Indices	31-Mar	24-Mar	Weekly Chg (bps)
iTraxx AxJ 5y IG	94.7	95.7	-1
AxJ IG Spread (bps)	173.4	171.7	2
AxJ HY (%)	6.5	6.56	-6
SOR 2y (%)	1.54	1.54	1
SOR 5y (%)	2.07	2.06	1
Malaysia 5y CDS	105.2	105.6	0
MGS 3y (%)	3.53	3.42	11
MGS 5y (%)	3.87	3.83	4
MGS 7y (%)	4.02	3.99	4
MGS 10y (%)	4.13	4.07	6
AAA 5y Spread* (bps)	52	53	-2
AAA 10y Spread* (bps)	54	58	-4
AA 5y Spread* (bps)	87	87	-1
AA 10y Spread* (bps)	96	96	0

Source: Bloomberg, BNM, RHBFIC        *MYR-denominated bonds

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