Credit Market Watch: Summary for week ending 12-May
· MYR Credit:
Ø MGS yields were little changed WoW in light trading. Corporate bond market was muted as well with yields barely moving and traded volume totalled only MYR1.0b.
Ø OPR still 3.00%: BNM kept the rate unchanged in last Friday’s MPC meeting and its tone of maintaining an accommodative stance to support domestic economic growth. The central bank also hinted a potential upside in 1Q17 growth, but it maintains the view that headline inflation will moderate in 2H17. No change in our house view of OPR staying at 3.00% in 2017.
Ø Relative value: Aman Sukuk 7/19 appears to have some value last trading at 4.08% vs Manjung 11/19 which was dealt at 4.02%.
· Asian Credit:
Ø UST retraced early week losses when yields fell on Friday after CPI and retail sales data came in below market expectations. The 10y UST yield was down 2bps WoW to 2.33%. CPI printed 2.2% in April (vs 2.4% in March) and retail sales only grew by 0.4% (vs 0.6% consensus) in the same month.
Ø Asian USD credits were mixed with JACI composite +1bp, JACI IG -1bp and JACI HY surge +11bps WoW. Sovereign curves were 1-5bps higher WoW except for the MALAY curve which fell 2-5bps.
Ø Rating change: Global A&T Electronics’ (GATE) rating was downgraded to CCC- from CCC+ by S&P as the agency sees difficulty for GATE to make a USD55m interest payment on 1 Aug 2017. The company’s liquidity is weak with negative cash flow due to high capex, low cash balance, poor standing in capital markets following an ongoing dispute with bondholders and lack of core banking relationships. The rising liquidity risk is reflected in the negative outlook.
· CDS: EM Asia 5y CDS spreads largely tightened 1-5bps except Korea which was flat and Indonesia +2bps wider.