¨ Treasuries rise particularly at the shorter-end ahead of the FOMC meeting. With a June rate hike priced-in, Investors will be eyeing further details on the Fed’s view on the economy, the rate hike trajectory and balance sheet reduction plans. UST2y inched almost 1bp higher

14 June 2017

Credit Markets Update

                                               

Markets Sideways as Fed in Focus

MYR Credit Market:

¨      Markets pause as the Fed FOMC sits. Markets have remained largely unchanged as money has been taken off the table in preparation for the coming Fed FOMC. This especially in light of the ongoing uncertainty surrounding the US administration. The MYR closed slightly stronger at 4.2625/USD gaining less than 0.1% underperforming some of its better performing neighbours in the EM Asia complex.

¨      Trading falls as market pauses. Trading in of Malaysian govvies was tepid with only slightly above to MYR1bn changing hands. Trading in the corporate space were healthier as trades amounted MYR465m. Trades occurred with little change in yields such as the the DANGA 20s which saw MYR170m trades closing at 4.11% (+0.7bps), MYR40m YTL Power 27s 4.97% (-0.2bps), and MYR30m AMAN 05/21 4.25% (-0.2bps). Danajamin guaranteed PPB saw MYR30m traded at 4.56% (-3.7bps). SME Bank issued MYR300m of 5 year bonds at 4.06%, 33bps above the benchmark GII. This tranche is part of its GG MYR3bn sukuk program. 

¨      MARC assigns preliminary rating of AA/Sta to Sime Darby Plantation subdebt. MARC assigns a preliminary rating of AA/Sta to Sime Darby Plantation Sdn Bhd (SDP)’s MYR 3bn programme of perpetual subordinated sukuks, two notches from the AAA corporate rating the entity has. This programme is the result of the novation of MYR2.2bn of debt from the holding company Sime Darby Berhad, as part of a group reorganisation which is expected to occur before July 2017.

APAC USD Credit Market:

¨      Treasuries rise particularly at the shorter-end ahead of the FOMC meeting. With a June rate hike priced-in, Investors will be eyeing further details on the Fed’s view on the economy, the rate hike trajectory and balance sheet reduction plans. UST2y inched almost 1bp higher to 1.36%, while the 10y yields settled -0.4bps lower to 2.21%. Elsewhere, Brent oil prices settled at USD48.72/bbl (+0.89% overnight) as markets widely expect a decline in the weekly print on US production.

¨      Asian credits were mostly sideways tracking UST yields as investors stay on the side-lines. IG credit spreads inched marginally wider to 175.2bp (+0.21), while average non-IG bond yields was unchanged at 6.54%. Elsewhere, Asian CDS protection cost was quoted tighter at 85.5bp led by PCCW-HKT (-4.7bps), Bank of China (-3.7bps) and PETMK (-2.6bps).

¨      In the primaries, Marble II (Ba2/NR/BB) sold USD500m 5nc2 bonds at 5.3% compared to initial guidance of 5.75% area, whereas Soechi Lines (B1/NR/B+), which is primarily in marine transportation, postpones planned USD benchmark 5nc3 bond issue citing ‘uncertain market conditions and adverse weather in Hong Kong’.

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