MYR Credit Market: MGS and USDMYR rallied to yearly lows. Trading activities were strong for another week in the MGS market as MYR20.78bn traded again. This was in concert with another week of rally among EM Asia assets, as DM central banks refrained from moving markets during their meetings in the beginning of the month. Benchmark yields continued to rally over the week especially at the belly and longer end of the curve. The 3y MGS underperformed the curve with a +3bps shift

8 May 2017

Credit Markets Weekly

MGS and USDMYR Rallied to Yearly Lows

SUMMARY:

¨      MYR Credit Market: MGS and USDMYR rallied to yearly lows. Trading activities were strong for another week in the MGS market as MYR20.78bn traded again. This was in concert with another week of rally among EM Asia assets, as DM central banks refrained from moving markets during their meetings in the beginning of the month. Benchmark yields continued to rally over the week especially at the belly and longer end of the curve. The 3y MGS underperformed the curve with a +3bps shift to 3.24% WoW while the 5y and 10y MGS saw yields fall -10bps to 3.58% and 3.96% respectively. This week saw the 10y MGS breach the 4.00% handle, and reach its lowest closing of the week at 3.95%. The MYR also rallied 0.053% WoW to 4.3387/USD. The USDMYR also saw its lowest close midweek at 4.3200.

Corporate News – Primaries were weaker after strong issuance the previous week and large GII auction which followed. Over the week, Cahya Mata Sarawak issued MYR500m of its MYR2bn AA3-rated sukuk maturing 05/22 while DRB-Hicom issued MYR100m A+-rated IMTNs maturing 11/20. The new 30y GII was announced at 4.895%, with a BTC of 2.39x. The new issuance saw a strong issuance of MYR2.5bn (MYR500m of which was privately placed).

¨      APAC USD Credit Market: The US Treasuries bear flattened, increasing by 3-7bps WoW as FOMC kept its fed funds rate unchanged while signalling confidence in the U.S. economic expansion. The House of Representatives also passed American Health Care Act to replace major parts of the Affordable Care Act. The global risk-on sentiment was also fuelled by the leading of Macron in the French election opinion polls. As expected, Macron won the election with 65.9% of the vote. Investors’ sentiment was largely unaffected by the decline in oil prices (USD49.10/bbl, -5.08% WoW) as the prospect of deeper supply cut appeared slim, compounded by strong US supply and rig count numbers. UST 2y and 10y widened by 4.8bps and 6.9bps WoW to 1.31% and 2.35% respectively. Looking ahead, headline and producer inflation reports are scheduled to release this week.

Rating Actions – Moody’s downgraded Standard Chartered Bank (HK)’s LT rating from Aa3 to A1, following the downgrade of the parent’s ratings; Moody’s revised Standard Chartered Bank (Singapore)’s outlook from negative to stable; Moody’s upgraded Yingde Gases Group Company Limited’s LT rating from Caa1 to B3.

Table 1: Index Weekly Movements

Indices	5-May	28-Apr	Weekly Chg (bps)
iTraxx AxJ 5y IG	92.2	93.8	-2
AxJ IG Spread (bps)	173.1	175.5	-2
AxJ HY (%)	6.44	6.43	1
SOR 2y (%)	1.45	1.44	1
SOR 5y (%)	1.96	1.94	2
Malaysia 5y CDS	107.0	108.3	-1
MGS 3y (%)	3.24	3.21	3
MGS 5y (%)	3.58	3.68	-10
MGS 7y (%)	3.86	3.90	-4
MGS 10y (%)	3.96	4.05	-10
AAA 5y Spread* (bps)	74	62	13
AAA 10y Spread* (bps)	74	64	10
AA 5y Spread* (bps)	110	97	12
AA 10y Spread* (bps)	106	94	12

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

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