Tuesday, October 24, 2017

FW: RHB FIC Credit Markets Update - 24/10/17




24 October 2017


Credit Markets Update


Sell-Off in MYR Govvies Space; Press Metal sold USD400m 5nc3 at 4.8%

MYR Credit Market:

¨      Benchmark MGS rose across the curve as govvies trading resurfaced. Benchmark govvie yields were mostly higher probably tracking the sell-off in UST last week. The 3y MGS rose +7bps to 3.47% while the 10y MGS ended at 3.96% (+5bps). The MYR, along with EM Asian currencies ended sharply lower at 4.2373/USD (-0.29%) amid the rally in USD.

¨      Week starts with stronger govvie trades. Govvie trading started the week stronger as MYR2.9bn of trades were recorded. Though most of the trades were concentrated on the short end, the benchmark MGS saw strong trades. The benchmark 3y MGS 02/21, 5y MGS 03/22 and 7y MGS 09/24 saw trades of MYR360m, MYR202m and MYR336m respectively with yields edging up +6.1 to +7.7bps. The off benchmark MGS 07/21 saw MYR353m trades at 3.609 (+6.6bps).

¨      Corporate trades on the other hand saw a healthy MYR562m change hands.  Trades were however highly concentrated on AAA and GG names. MYR210m of trades involved CAGAMAS 09/20s and 12/22s. The former saw its first trade since issuance and was traded at 3.99% whereas the latter changed hands at 4.17% (+2.7bps). Among the GG names, short-dated GOVCO 02/18 saw MYR30m done at 3.32% (-9.8bps), whereas LPPSA 32s and PTPTN 03/32 saw trades of MYR55m and MYR80m respectively at 4.81% (+0.1bps) and 4.84% (+3.4bps).

¨      In the primary segment, QSR Stores Sdn Bhd issued MYR1.3bn sukuk across 13 tranches with sizes ranging from MYR20m to MYR200m and maturities from 1y to 7y. Furthermore, TRIplc Medical Sdn Berhad printed MYR264m sukuks across 6 tranches with sizes ranging from MYR40m to MYR50m and maturities of 5y to 16y.

APAC USD Credit Market:

¨      US risk markets consolidate respite to the UST yield curve. The equities markets of US saw a consolidation after close to a week of positive performance while the volatility index began to increase. This occurs while investors pare gains ahead of further earning reports and as the market digests the prospects for tax cuts, and the prospective future Fed chairperson which the US President continues to mull over. The UST yields saw a slight rally as the 2y narrowed -1bp to 1.56%, while the 10y declined approximately 2bps to 2.37%. OPEC reported the highest level of compliance on the voluntary production adjustments by OPEC and non-OPEC members at 120% in September while reiterating "all options are left" for rebalancing the market, reinforcing the view the output reduction will be extended in the November meeting. Brent crude oil prices have remained stable at USD57.4/bbl (+0.38%). The DXY edged higher to 93.94, gaining 0.25% overnight. China's Communist Party 19th National Congress ends today with attention of the market concentrated on the revelation of the new Politburo Standing Committee on Wednesday.

¨      Asian credit markets firm. IG credit spreads settled slightly lower at 158.5bps (-0.5bp) while average speculative bond yields closed at 6.59% (+1bp). The iTraxx AxJ IG CDS continued to trend lower to 74.5bps as most constituent members ended tighter or stable. Performers in the CDS space were ICBC, Bank of China and GS Caltex Corp (-2bps each), whereas laggards were Kookmin Bank (+3.4bps) and the S Korea sovereign (+1.5bp).

¨      In the primaries, Press Metal (Labuan) Ltd (Ba3/BB-/NR), guaranteed by Press Metal Aluminum Holdings Berhad and other key subsidiaries, priced USD400m 5nc3 bonds at 4.80%, 45bps inside of IPT area. Huaneng Hong Kong Capital Ltd (Unrated), guaranteed by China Hua Neng Group Kong Kong Ltd sold USD500m Pnc5 at 3.60% against IPT at 3.95% with China Huaneng Group, a Chinese state-owned enterprise, providing a keepwell deed and equity interest purchase undertaking. Later today, The Export-Import Bank of Korea (Aa2/AA/AA-) may tap the markets for USD 3y FXD bond at T+110bps and 5y FXD at T+120bps. Elsewhere, petrochemical player - PT Chandra Asri Petrochemical Tbk (Ba3/B+/NR) plans investor meetings in Hong Kong, Singapore and London for a potential USD bond issuance, while Aviation Plc (expected issue rating: NR/B/B+), a commercial passenger aircraft leasing company, will meet investors in Asia, UK and the US for potential USD bond.

¨      Over to ratings, MLC Ltd was affirmed at A+ by S&P; outlook revised to stable from negative. Largely premised on expectations that MLC's capitalization will remain robust and continue to underpin the company's creditworthiness, while furthermore anticipating that the Insurer's operating performance will remain solid. The ratings were subsequently withdrawn by S&P at the company's request.



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