FW: RHB FIC Credit Markets Update - 13/9/17

 

 

13 September 2017

 

 

Credit Markets Update

                                               

APAC USD Primaries Resurfaced; UST Rebound

 

MYR Credit Market:

¨         Benchmark MGS yields rose across the curve. 3y and 10y MGS gained approximately 3bps each to 3.32% and 3.86% given the rebound in UST yields given the waning concerns of Hurricane Irma and North Korea. Asian EM currencies like the IDR and MYR led declines, with the latter weakening 0.24% to 4.208/USD.

¨         Trading volume for govvies saw MYR3.2bn changing hands. The benchmark MGS 7y on MYR383m trades added 1.6bp to 3.783%, while the benchmark GII 7y on MYR340m trades edged lower to 3.928% (-0.8bp). The benchmark 3y and 10y MGS saw decent trades of MYR238m and MYR145m respectively.

¨         Corporate trading improved to MYR411m yesterday. Interest was seen in quasi-government names which represented over 47% of total corporate trades. Yields of Danainfra 4/21, 5/22, 11/22, 9/24 and 3/32 traded between 0-3.4bps tighter on combined MYR115m trades. LPPSA 4/24 gained 0.6bp to 4.27%, while yields of Khazanah 3/20 traded 13bps tighter to 3.9%. Elsewhere, UMWH 19-21s' recorded a total MYR35m trades, all narrowing between 0.8 to -11bps to 4.37%, 4.58%, 4.44% and 4.62% respectively. In the primaries, Boustead Holdings Berhad (NR) issued MYR500m sukuk from its MYR2bn sukuk murabahah programme, with maturity of 7y. Putrajaya Bina Sdn Berhad (AAA - MARC) printed MYR600m sukuks across 4 tranches with maturities from 5y, 7y, 9y and 10y from its MYR1.58bn IMTN sukuk wakalah programme.

¨         Foreign ownership in MYR bonds fell MYR745m in Aug. Given the outflow of MYR1.1bn in government debt, total foreign holding in government debt amounted to 26.4% from 26.5% during the same period, while Aug foreign ownership of MGS to increase to 40.3% from 40.1% the month before.

APAC USD Credit Market:

¨         Risk on trades continue to consolidate pulling USTs lower. The USTs continued to see yields push higher as risk on trades were seen once more in the market, the US equities market saw a resurgence while gold and safe haven currencies continued to weaken suggesting the reduced pricing in of geopolitical pressures and news reports suggesting Hurricane Irma was less destructive than initial expectations. Economic data was also supportive of risk trades as the US JOLTS job opening data of the Labor Department edging up to 6.17m in Jul from 6.12m in June, maintaining a level above 6m. The 2y UST fell +1.6bps to 1.34% while the 10y UST fell +3.7bps to 2.17%. Following the rally in risk assets, the DXY Index was largely unchanged overnight to 91.88.

¨      IG credit spreads outperformed once more. The average Asian ex Japan IG spreads saw spreads improve -2.0bps ending at 170.7bps while the average yield on HY Asian ex Japan moved up +2.0bps to 6.55%. The average IG Asia ex Japan CDS narrowed to 74.75bps (-1.7bps). The South Korean complex continue to see CDS levels narrow as concerns on N Korea see less pricing in the markets, now joined by PCCW-HKT Telephone (-2.5bps), Telekom Malaysia (-2.5bps) and CNOOC (-2.2bps).

¨         Primaries were led by banking names, as Bank of Qingdao and Westpac Banking Corp both issued AT1 subdebt. The former issued USD1.2bn Pnc5 at 5.5% v IPT of 5.7% and the latter issued USD1.25bn Pnc10 at 5.0% v IPT of 5.375%. Korea Development Bank (Aa2/AA/AA-) issued two tranches of 3y and 5y FRN totalling USD500m and USD150m each. The issuances were priced at and 3mL+67.5bps (v IPT 3mL+80bps) and 3mL+80bps (v IPT 3mL+90bps) respectively. Sino-Ocean Group Holdings (issue rating: Ba2/NR/BB) garnered BTC of 6x for USD600m Pnc5 bonds priced at 5.0% (IPT at 5.375% area). Inventive Global Investment Limited (NR/NR/A), a fully owned entity by ABC International Holdings Ltd, issued USD500m 3y bonds guaranteed by Agriculture Bank of China Ltd, HK branch (A2/A/NR). The issuance was priced at T+110bps v IPT of T+130bps. Beijing Infrastructure Investment Co Ltd (A1/A+/A+) is currently having investor road shows with the intention to issue USD bonds.

 

 

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