UST bear flattened; extends Fed-driven losses. 2y note rose to 1.31% (+1.2bps), while 10y note jumped by 3.6bps to 2.35%. UST yields traded higher yesterday despite a sharp decline in oil prices as the prospect of deeper supply cut appeared slim. Brent price fell to the lowest level since Nov 2016 (USD48.3

5 May 2017

Credit Markets Update

                                               

Oil Prices Dip to Lowest Since Nov-16; AHCA Passes the House

MYR Credit Market:

¨      MGS market rally halts as global bonds falter. The MGS yield curve halted its rally yesterday, as global bond markets gave way yesterday. The 10y-MGS rose 1.3bps to 3.96%, still remaining firmly below 4%. The 3y-MGS remained unmoved at 3.25%. We also saw MYR pair down some of its gains trading at 4.3275/USD (-0.17%).

¨      Weaker trading activities as markets prepare for the new auction. There were MYR4.7bn trades done among the Malaysian govvies. Most trades were focused on the ‘19s maturities which saw MYR1.1bn of trades, whereas the long-dated maturities of above 10-years accounted for MYR589m (12% of total govvie trades). Corporate trades were subdued as only MYR247m changed hands overnight. Among the top traded were again the PASB and DANAINFRA bonds, though we did see trading in WCE and Putrajaya bonds. The PASB saw both the ‘22s and GG ‘19s traded at 4.33% (+0.1bps) and 3.82% (+1.5bps) while the DANAINFRA ‘35s were traded at 4.95% (+3.9bps). The WCE ‘28s, ‘29s and ‘30s saw yields move -10bps to +15bps to 4.95%-5.01% whereas Putrajaya ‘21s were traded -1.9bps stronger at 4.26%.

¨      Market will be focused on the new 30y-MGII tender which will close today which is expected to set the tone for trading the coming week. Also upcoming over the day will be the external trade numbers for the month of March.

APAC USD Credit Market:

¨         UST bear flattened; extends Fed-driven losses. 2y note rose to 1.31% (+1.2bps), while 10y note jumped by 3.6bps to 2.35%. UST yields traded higher yesterday despite a sharp decline in oil prices as the prospect of deeper supply cut appeared slim. Brent price fell to the lowest level since Nov 2016 (USD48.38/bbl). On the policy front, the House of Representatives passed American Health Care Act to replace major parts of the Affordable Care Act, a symbolic victory for President Trump, although it still needs to get through the Senate. The U.S. Dollar Index was lower at 98.80 (-0.42%).

¨         The iTraxx AxJ IG index was largely unchanged at 92.0bps (-0.9bps) as the markets stayed quiet ahead of the 2^nd round of the French Presidential elections, with lower CDS spreads seen in GS Caltex Corp, Telekom Malaysia and CNOOC Ltd. The HY space stayed firm at 6.43% (+0.6bps), while the IG credit spreads tightened by 3.2bps to 172.9bps.

¨         In primaries, Bank of China (Singapore) (issuer rating: A1/NR/A) sold USD600m 3y floating bond at 3mL+77bps, its IPT was at 3mL+100bp area, with BTC of 1.83x. In the pipeline, Hindustan Petroleum Corp (issuer rating: Baa3/NR/BBB-) plans to raise USD500m to finance its FY18 capex.

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