MYR Credit Market BNM maintained its interest rates as foreign inflows into govvies reported. The latest report on foreign holdings of MGS and GII revealed there was an inflow of MYR6bn, reversing a 5-month selldown o

15 May 2017

Credit Markets Weekly

BNM Left OPR Unchanged; Fed June Hike Expectations Tumble

SUMMARY:

¨      MYR Credit Market BNM maintained its interest rates as foreign inflows into govvies reported. The latest report on foreign holdings of MGS and GII revealed there was an inflow of MYR6bn, reversing a 5-month selldown of the asset class since Nov-17. This new increase brings foreign holdings to 40.1% of total MGS outstanding and 26.8% of all govvie issuances outstanding. As was widely expected BNM decided to maintain the OPR at 3.00%.

Corporate News – Primaries were weaker in the shortened week. Over the week, Sabah Development Bank issued MYR165m of its MYR1bn AA1-rated program maturing 05/22 while WCT Holdings issued MYR200m AA- rated sukuk maturing 05/22. Swift Haulage issued 15y MYR106.9m unrated convertible bonds, callable from 06/17. The new auction of the benchmark 10.5y MGS 11/27 has been announced and will be issued on 16/05/2017. The expected issuance size is MYR3bn with up to MYR1bn to be privately placed.

¨      APAC USD Credit Market: US treasuries were firmly lower over the week, especially on Friday after the weaker Apr inflation print and consumer spending data, lowering the expectations for a June Fed hike according to the Chicago Mercantile Exchange’s FedWatch tool (June expectations dip from 83.1% to 78.5%). Despite the largely mixed US economic prints in the past week, market participants were largely fixated on the CPI data which was below expectations at 2.2% YoY (consensus: 2.3%) and growing 0.2% MoM, whereas retail sales grew 0.4% MoM against consensus of 0.6% - dampening inflation expectations. UST 2y and 10y declined 2-3bps to 1.20% and 2.33% respectively.

Rating Actions – Moody’s upgraded Qantas Airways Ltd’s rating from Baa3 to Baa2, Moody’s upgraded Indosat Ooredoo’s rating from Ba1 to Baa3; Fitch assigned first time A+ rating to Rongshi International Finance Limited’s senior unsecured notes (guaranteed by State Development & Investment Corporation.

Table 1: Index Weekly Movements

Indices	12-May	05-May	Weekly Chg (bps)
iTraxx AxJ 5y IG	88.7	92.2	-3
AxJ IG Spread (bps)	172.1	173.1	-1
AxJ HY (%)	6.56	6.44	12
SOR 2y (%)	1.43	1.45	-2
SOR 5y (%)	1.94	1.96	-2
Malaysia 5y CDS	102.6	107.0	-4
MGS 3y (%)	3.26	3.24	2
MGS 5y (%)	3.57	3.58	-1
MGS 7y (%)	3.86	3.86	0
MGS 10y (%)	3.94	3.96	-1
AAA 5y Spread* (bps)	74	74	0
AAA 10y Spread* (bps)	74	74	0
AA 5y Spread* (bps)	111	110	2
AA 10y Spread* (bps)	108	106	2

Source: Bloomberg, BNM, RHBFIC        *MYR-denominated bonds

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