Friday, April 14, 2017

· Strong bids. A surprisingly strong show in today’s 5y GII 4/22 auction drawing a

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%

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