29 August 2017
Credit Markets Update
Rains and Rockets Rally Bonds
MYR Credit Market:
¨ The MYR closed stronger at 4.2677/USD (+0.11%) amid the weakness in the USD amid the rally in US Treasuries following the speeches at the Jackson Hole symposium. Yields of longer-dated MGS pushed lower with the 10y narrowing 2bps to 3.91%, while the 3y MGS rose marginally to 3.36%. The MYR could trade weaker later today given the latest of North Korean missile test which breached Japan's air space.
¨ Govvies trading slowed to MYR2.3bn. About MYR1bn occurred in the <3y bracket. Top traded was the 7y MGS with MYR380m changing hands, tightening 1bp to 3.86%, followed by benchmark GII 3y with MYR200m, settling marginally lower at 3.49% and off-benchmark GII 5/18 on MYR182m trades.
¨ Corporate trading remain busy with MYR651m recorded; trades interest in a variety of sectors and tenures. MYR85m were trades involving Danainfra 5/37 and 3/47 closing at 4.94% (-2bp) and 5.13% (flat) respectively. SEB 7/24 traded unchanged at 4.55% on MYR60m dealt. The newly-minted Celcom Networks on combined MYR60m trades ended flat at 4.83%, 5.00% and 5.10% respectively.
¨ In the primaries, AA3-rated BGSM printed MYR300m 4y bonds and MYR400m 8y bonds from its MYR10bn Sukuk programme. As mentioned above, Celcom Networks Sdn Bhd issued 3 tranches of AA+ sukuks, MYR200m, MYR350m and MYR450m with 5y, 7y and 10y maturities. Lastly, Northern Gateway Infrastructure Sdn Bhd fully drawdown MYR340m from its AA1-rated programme, which is distributed across 14 tranches with maturities of between 3-16y. Looking ahead, the reopening of the 7y GII 8/24 will be auctioned later today
APAC USD Credit Market:
¨ Rains and rockets rally bonds. As market participants digest the speeches and presentations on the Jackson Hole symposium, the market has started to take stock of the effect of Hurricane Harvey. The WTI weakened -2.7% on concerns of a crude oil glut, as refineries close. North Korea launched a missile over the North-East of Japan, re-escalating tensions, as Japan saw this as an unprecedented and serious threat. The USD continued to fall as the DXY index fell to 92.21 (-0.58%), the lowest level for the year. The USTs continued to rally with yields picking up -0.6bps to 1.33% for 2y USTs and -0.9bps to 2.16% for 10y USTs.
¨ Asian credits rally despite the rally in UST. The average Asian ex Japan IG spreads and the average yield on HY Asian ex Japan bonds both rallied -0.4 and -3.0bps respectively to 170bps and 6.67% even as the UST curve continued to rally. The average IG Asia ex Japan CDS pushed lower to 80.8bps (-2.4bps). The rally was led by Korean corporate and Singaporean Banks. Samsung Electronics, Hyundai Motor, SK Telecom, KT Corp, POSCO and Korea Electric Power Company all saw CDS rally -3.9 to -4.8bps in a day. The subdebt CDS of OCBC, UOB and DBS Banks saw spreads tighten -4.4bps to -7.8bps.
¨ Asian USD primary markets were quiet once more. Woodside Finance (Baa1/BBB+/NR) announced plans to have a roadshow in the week for possible new USD bonds.
¨ Over to ratings, S&P shifts down to A/Neg its ratings on Arch MI Asia Ltd from A+. This insurer, formerly known as AIG United Guaranty (Asia) Ltd, was put on a negative review following its acquisition by Arch Capital Group Ltd (ACGL) (Baa1/A-/A-), from American International Group (Baa1/BBB+/BBB+). Despite the view that the acquisition is aligned with ACGLs expansion into the mortgage insurance sector and its strategic importance to the parent company, the company's rating was shifted down one notch below the rating of its new group's core operating subsidiaries. The negative outlook was placed premised on the outlook of the parent.