FW: RHB FIC Credit Markets Update - 22/2/18

 

 

 

 

22 February 2018

Credit Markets Update

           

US Treasuries Fell After Fed Minutes.

MYR Credit Market:

¨      MGS curve steepens; USD continues to strengthen. As global yields continued to push upwards, the long end of the MGS saw yields push up too. The MGS yield curve mildly steepened as the 3y MGS saw yields trend lower -3.6bps to 3.33% while 10y MGS saw yields inch up +1.3bps. The 15y MGS also saw yields pick up +3.2bps to 4.51%. As the UST yields continue to push up, rallying the USD, the MYR traded largely unchanged at 3.9060/USD (-0.06%). All eyes on Malaysia’s foreign reserve release scheduled today.

¨      Govvies trading activities edged up as over MYR3.0bn trades were recorded. Off-benchmark securities GII 05/20 and MGS 11/26 both saw MYR350m and MYR139m change hands traded weaker at 3.59% (+10.3bps) and 4.08% (+1.4bps). The 5y benchmarks MGS 03/22 and GII 04/22 saw active trading of MYR163m and MYR160m each as they changed hands at 3.59% and 3.89%, unchanged from previous trades. The benchmarks 5y and 7y MGS 09/24 and 11/27 remained active as each recorded trades of MYR110m and MYR103m while the benchmark 15y GII 06/33 saw MYR130m traded at 4.60% (+0.5bps).

¨      Secondary flows saw trade volume for corporate bonds/sukuks also saw a pick up as MYR360m was recorded. Long dated TENAGA 32s and WESTPORTS 03/28 recorded trades of MYR60m each. The former traded stronger at 4.88% (-1.4bps) while the latter weaker at 4.90% (+41.7bps). SEB 04/31 on the other hand traded largely unchanged at 5.11% (-0.1bps) on MYR 30m trades. Other power producers SAJC 29s, SPG 10/26 and ANIH 28s crossed at 5.49% (-11.7bps), 4.85% (-1.5bps) and 4.87% (+3.6bps) on trades worth MYR20m respectively.

APAC USD Credit Market:

¨      US Treasuries fell post Fed minutes; 10y UST inched closer to 3%. The USTs yields sustained upward pressure following the release of Jan FOMC minutes which saw the 2y, 10y and 30y USTs yields rising to 2.27% (+4.74bps), 2.95% (+6.04bps) and 3.22% (+6.74bps) respectively. The belly of the curve received minimal support amid modest demand for 5y note auction, dragging yields on the 5y UST higher to 2.69% (+4.12bps) post-minutes release. The account of the statement revealed positive view on strengthening economy though Fed officials were mostly calm over the possible risk of an overheating economy. Nevertheless, gradual rate hike trajectory is unlikely to change at this juncture with at least three (3) FFR hikes on the table. The USD continued to advance amid the rising yields as the DXY touched the 90 mark once again (+0.32%). Over in economic print, existing home sales Jan 18 unexpectedly declined to 5.38m (consensus: 5.60m) from the previously revised figure of 5.56m.

¨      The iTraxx AxJ IG credit spreads contracted slightly to 68.8bps (-0.5bps). Over in CDS space, Singapore Fis regained traction as spreads for United Overseas Bank Ltd. (sub) and DBS Bank Ltd. (sub) tightened about -1.5bps and -1.4bps respectively. Leading the widening, on the other hand, was Swire Pacific Ltd. which saw CDS levels spiked upward around +3.8bps, trailed by Reliance Industries Ltd. with spreads increase of nearly +3.6bps. Seeing a similar rate rise was PCCW-HKT Telephone Ltd. and State Bank of India/London with close to +3.2bps. Other notable entity was CapitaLand Ltd. which saw spreads grew around +2.1bps.