11 May 2017
Credit Markets Update
WCT Issues MYR200m 5y Sukuk; Noble Bonds Slip on Profit Warning
MYR Credit Market:
¨ Trading remained lacklustre as global concerns remained. Moving into a public holiday, trading was lacklustre, as participants awaited the results of the South Korea elections and clarification of the ECB governor in his speech in the Netherlands. The Malaysian govvie market saw traded amount fall to below MYR2.1bn. Trades were well distributed, though a large amount remained in the short-dated portion of the curve, where 18s and 19s maturities saw MYR355m and MYR507m trades respectively. The long-end of the curve also saw activity, where the 33s maturity saw MYR153m change hands and the 24s maturity saw MYR269m. The corporate trades still remained weak with MYR375m changing hands. Among the major traded names were the 17s maturities of Cagamas and ADCB. The remaining ADCB 17s was traded at 4.30% (-8.4bps), whereas two facilities, namely the 08/17s and the 12/17s saw large trades of MYR100m each, trading at 3.616% (-2.7bps) and 3.83% (+1.6bps) respectively.
¨ MGS rally has a breather and MYR got battered. The MGS yield curve halted its rally, after the rally seen over the week. The 3y-MGS remained unchanged at 3.31% and the 10y-MGS remained below 4.00% at 3.95% (+1bp). The MYR fell against the greenback at 4.3472/USD (-0.26%) on Tuesday.
¨ Over in the primaries, WCT Holdings issued 5y MYR200m of its MYR1.5bn sukuk program, rated AA-. The facility remains on a negative outlook since its removal from the developing outlook by MARC in February 2017. Sabah Development Bank also continue to be active in the primaries with issuances of MYR165m AA1-rated 5y bonds.
¨ On the economic data front, Malaysia March Industrial Production is scheduled to be released later today, which is expected at 4.8% YoY.
APAC USD Credit Market:
¨ Treasuries recovered slightly despite the hasty sacking of FBI’s Comey and North Korea nuclear test pledge. 2y UST note rose to 1.35% (+1.4bp); 10y bond yield climbed to 2.41% (+1.6bp). Elsewhere, Boston Fed President Rosengren commented that the Fed should hike interest rates at least 3 times in 2017. The DXY index edged marginally higher to 99.7 (+0.401%).
¨ Asian market traded marginally tighter. The iTraxx AxJ IG was quoted lower at 89.8bps yesterday (-0.9bp) with CDS spreads of most constituent members trading lower. CDS spreads of India’s IDBI Bank rose 12bps after the Reserve Bank of India placed the bank under watch, a move that restricts it on new lending and dividend distribution. IG credit spreads were mostly unchanged at 171.9bps, however the average speculative bond yields rose 2bps overnight to 6.45%. Elsewhere, bonds of Noble Group (B2/B+/BB+), NOBLSP ’22, jumped nearly 2 percentage points (ppt) after the company issued a 1Q profit warning that it will likely post a quarterly loss of about USD130m, whereas NOBLSP ’18 inched nearly 3ppt wider.
¨ In the primary market, there will be a slew of new bonds to be priced later today. Cheung Kong Property Holdings Ltd (A2/A-/A-) may price USD Pnc3 with IPT at 5% area. Bank of East Asia (issue rating: Ba2/BB/NR) will tap the market for USD benchmark AT1 Pnc5 with IPT at 6% area. Elsewhere, Huachen Energy (B1/NR/NR) is looking to sell USD 3y bonds with IPT at 7% area.
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