22 August 2017
Credit Markets Update
MYR Strengthened; APAC Credits Stay Firm
MYR Credit Market:
¨ MYR strengthened further against the greenback. The MYR advanced 0.07% to 4.287/USD on the back of the upside surprise in Malaysian 2Q GDP print which grew at 5.8% YoY last Friday though the recent fall in global risk appetite and positioning for the Jackson Hole meeting may see further pressure on EM Asian currencies and support on yields. On the other hand, benchmark MGS yields compressed. 3y MGS closed at 3.38% (-1.6bp), while the 10y was lower at 3.97% (-0.7bp).
¨ Govvies trading active with MYR3.0bn changing hands. Interest was across the MGS curve as seen with the benchmark 3y, 5y, 7y, and 10y MGS accounting for 50% of total trades for the day. GII trades reached MYR1.2bn with the most traded in the benchmark 3y GII with MYR480m trades, tightening 2bps to 3.51%, the benchmark 5y GII narrowed -4bps on MYR200m dealt.
¨ Corporate segment trading stayed healthy as trading volume totalled at MYR423m. Interest was recorded in the power and plantation sector. Yields of YTL Power 5/17 tightened -1.4bp to 4.93% on MYR50m trades, TBEI 9/29, 3/31 and 3/32 traded flat at 4.96%, 5.06% and 5.14% on combined MYR50m trades. Both KLK 4/26 and BKB 6/23 edge a tad lower to 4.60% and 4.49% (-0.8 to -1.5bp) respectively.
¨ On economic data releases, Malaysia foreign reserves is expected to remain unchanged at USD99.4bn at Aug-15 from end-July.
APAC USD Credit Market:
¨ Treasuries stay firm with the 10y UST strengthening -1.2bps to 2.18%, while the 2y was marginally lower at 1.30% as investors paused for the upcoming speeches by top central bankers later this week at the Jackson Hole gathering. USD also continue to edge lower amid the US political backdrop and the weaker demand for risky assets in the past week. Elsewhere, market participants continue to price in no further rate hikes this year as the probability of a December hike dipped to 32.3% from last Friday's 37%. The DXY index slump further by 0.36% to 93.095.
¨ Asian credit markets mostly firm. IG credit spreads and average speculative bond yields were flat at 172.5bp and 6.71%. The iTraxx AxJ IG spreads inched marginally higher to 83.6bp (+0.7bp) led higher by DBS Bank (+5.2bp), Korea Electric Power Corp (+4.0bp) and Capitaland Ltd (+3.0bp). Although most Korean corporate CDS' continued narrow amid the deescalating situation between North Korea and the US as observed in GS Caltex Corp (-3.0bp), POSCO (-2.6bp) and Kookmin Bank (-2.2bp).
¨ Elsewhere on new supply, Hyundai Capital Services Inc (Baa1/A-/BBB+) printed USD600m 5y bonds at T+135bp compared to IPT at T+155bp area and USD300m 10y bonds at T+155bp, 15bps inside guidance levels. In the pipeline, China Great Wall Asset Management (expected issue rating: Baa1/BBB+/A) will hold investor roadshow later today in Hong Kong for USD bonds.
¨ CAR Inc ratings were slashed by S&P to BB/Sta from BB+/Neg. The China based car rental company's rating was lowered to reflect a significant decline in CAR Inc's long term fleet rental business, which signals a deterioration in its competitive fleet rental business. Aggressive prices has led to weakening profits as competition continues to intensify. Nevertheless, S&P expects CAR Inc's EBIT interest coverage at 2.1-2.6x over the next 12 months from earlier estimates of 3.5-4.0x.