Results: GII 4/22 New Issue
· Strong bids. A surprisingly strong show in today’s 5y GII 4/22 auction drawing a bid/cover of 2.773x on an expected MYR4b size. This is the highest bid/cover since Feb 2016 for auction in 3-5y sector and a jump from 1.54x recorded by the 5y MGS auction back in March. Understandably, GII tends to attract participation from wider domestic accounts than the conventional MGS.
· Local bond market has been lacklustre MTD. Renewed risk aversion sentiment led by lower UST yields to a certain degree encourages mild risk taking and this bond provides a balance of yield and duration exposure. We think local banks account for majority of the demand together with some interest from asset managers and pension funds.
· Next auction is the reopening of 15y MGS 4/33 which will replace MGS 6/31 as the new benchmark. We estimate a size of MYR3b.
Bid to cover: 2.773
Highest yield: 3.957%
Average yield: 3.948%
Lowest yield: 3.925%
Cut off: 29%