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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