FW: RHB FIC Credit Markets Weekly - 21/8/17

 

 

21 August 2017

 

 

Credit Markets Weekly

 

Geopolitical Risk-off Keeps Yields Down; Malaysia GDP Upside Surprise

SUMMARY:

¨      MYR Credit Market: De-escalation of geopolitics; MYR strengthened. The week saw a reduction in geopolitical escalation between the US and North Korea which occurred over the weekend before and the lower than expected CPI print supported Asian currencies. The rally later fell on global risk-off trades. MYR strengthened 0.12% WoW to end at 4.2900/USD. Malaysia's CDS spread rallied -6.9bps WoW to 79.6bps. The govvies rallied as the 3y MGS closed at 3.23% (-3.0bps) while the 10y MGS at 3.98% (-2bps).

Corporate News – MARC revised Kapar Energy's outlook to stable from negative, affirmed at AA+_is. The revision on KEV's rating, which operates and owns the Kapar Power Station (KPS) was largely premised on the improvement of its cash flow and liquidity position, while also considering the support received from TNB (60% owned) through the implementation of periodic resetting of KPS outage rates which translated to an improvement in operational performance.

¨      APAC USD Credit Market: Treasuries fell but rallied on Barcelona incident. US-North Korea tensions saw a reduction leading to a rise in yields supported by more positive data though more dovish messages from the Fed and ECB and a terrorist attack at Barcelona, Spain started a wave of risk-off trades. UST 2y and 10y yields picked up +0.5 to 1.15bps WoW to 1.31% and 2.20% respectively; Asian bond markets traded tighter; Primaries slowed to USD1.0bn amid the risk off market tone.

Rating Actions – S&P upgraded Yingde Gases Group Co to CCC+; Moody's revised Origin Energy Ltd's outlook to Baa3/Sta from negative; Noble Group Ltd was downgraded once more by both S&P and Moody's to CCC-/Neg and Caa3/Neg; Moody's downgrades Panda Green Energy Group rating to B2/Sta.

 

Table 1: Index Weekly Movements

Indices	18-Aug	11-Aug	Weekly Chg (bps)
iTraxx AxJ 5y IG	83.2	87.0	-4
AxJ IG Spread (bps)	172.3	173.9	-2
AxJ HY (%)	6.71	6.76	-5
SOR 2y (%)	1.29	1.25	4
SOR 5y (%)	1.73	1.70	3
Malaysia 5y CDS	79.6	86.5	-7
MGS 3y (%)	3.23	3.26	-3
MGS 5y (%)	3.59	3.66	-6
MGS 7y (%)	3.89	3.90	-2
MGS 10y (%)	3.98	3.99	-2
AAA 5y Spread* (bps)	71	64	7
AAA 10y Spread* (bps)	68	67	1
AA 5y Spread* (bps)	106	100	7
AA 10y Spread* (bps)	104	103	1

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

 

 

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