FW: RHB FIC Credit Markets Update - 13/2/18

 

 

 

13 February 2018

Credit Markets Update

           

Focus on Malaysia 4Q17 GDP Release Tomorrow; UST pared gains.

MYR Credit Market:

¨      MGS weakened on the front end; MYR firmed ahead of 4Q17 GDP. Buying on dips seen on the 10-year space as bond yields grinded lower with levels closing at 3.84% (-8.1bps) while the yields of 7y MGS, on the other hand, crossed above the 10y MGS yield to close at 3.92% (+1.4bps). The spike in short-end yields were in tandem with recent upwardly movement in global bond yields. The MYR was largely unchanged against the greenback as investors seen keeping a close tab on Malaysia’s 4Q17 GDP data scheduled for release tomorrow. The MYR held steady at 3.9385/USD (+0.03%).

¨      Decent start to the week for govvies as trade volume recorded at a healthy MYR2.1bn. Trading was largely concentrated on the belly and long end of the curve, accounting nearly 73% of total trades. Demand picked up well for benchmarks 7y GII 08/24, 10y GII 07/27 and 15y GII 08/33 with MYR100m, MYR140m and MYR120m of trades each, closing at 4.18% (+0.9bps), 4.21% (-0.1bp) and 4.64% (unchanged) respectively. The benchmarks 3y MGS 02/21 and 10y MGS 11/27 drew steady interest among participants which saw MYR125m and MYR112m change hands respectively. Other notable trades include off-benchmark MGS 09/21 with volume of MYR121m, last traded at 3.62% (+1bp).

¨      Trading on corporate bonds/sukuks remained lacklustre with total trades of just under MYR323m recorded ahead of upcoming Chinese Lunar New Year holidays. Issuers from the infrastructure and utilities segment accumulated about 42% of total transactions. Highest traded was MAYBANK perpetual callable 10/25 and 10/24 with combined trades of around MYR52m. The former, trading for the first time, dealt at 4.75% while the latter saw yields rise +30bps to 4.85%. This was followed by PUBLIC sub notes 11/23 with trades amounted to MYR36m, +10.1bps higher from previously traded to close at 4.4%, while UMWH 6/20 recorded MYR30m in volume with yields edge up +3bps to end at 4.50%.

APAC USD Credit Market:

¨      US Treasuries slightly pressured; Focus on CPI data tomorrow. The USTs ticked higher on the back of equity market rebound as safe-havens trade slowly diminished. The 2y and 10y USTs yields edged up a tad to 2.08% (+0.2bps) and 2.86% (+0.73bps) respectively. The belly of the curve posted the most losses as the 5y UST yields rose to 2.56% (+1.54bps). The longer tenure 30y UST, on the other hand, retreated as yields rallied to 3.14% (-1.57bps). Defensive trade is expected while investors await for the release of CPI data tomorrow. The USD traded lower yesterday amid reduced volatility across the global stock market which saw the DXY slip -0.26%, closing at 90.2. Meanwhile, President Trump has released his infrastructure plans yesterday, proposing to stimulate USD1.5trn of investments over the next decade with the utilisation of around USD200bn in new federal funds to be approved by Congress.

¨      The iTraxx AxJ IG credit spreads largely unmoved at 75.5bps (+0.3bps). Leading the rally was Reliance Industries Ltd. with spreads tightening of close to -2.9bps. This was followed by Chinese Fis China Development Bank, Industrial and Commercial Bank of China Ltd, Bank of China Ltd. as well as Export-Import Bank of China with spreads reduction between -1.7bps and -1.4bps. Over in sovereign space, Philippines led the rally which saw CDS levels falling nearly -1.9bps, trailed by Malaysia and China where CDS levels declined almost the same rate of about -1.2bps each. Leading the widening, on the other hand, was Korea Electric Power Corp. as CDS levels edged up approximately +6.7bps. This was followed by Hutchison Whampoa Ltd. with spreads widening of about +5.5bps while Telekom Malaysia Bhd deteriorated close to +5.3bps. Seeing a similar spreads increase of around +4.8bps was Sun Hung Kai Properties Ltd and Hongkong Land Co. Ltd. Other notable players include PCCW-HKT Telephone Ltd., Samsung Electronics Co. Ltd., United Overseas Bank Ltd. (sub) and CapitaLand Ltd. where spreads grew in the range of +2.8bps and +3.8bps.