FW: RHB FIC Credit Markets Update - 23/2/18

 

 

 

23 February 2018

Credit Markets Update

           

US Treasuries Rebounded on Slight Relief; MKD Kencana Issued MYR1.2bn.

MYR Credit Market:

¨      MGS bear flattens. As UST yields pushed to new highs the day before, dragging down global govvies, the MGS saw yields pressured upwards. The 3y MGS gave back gains as it saw yields rise +4.6bps to 3.38% while the 10y MGS saw yields inched up a further +1.7bps to 4.06%. The spike in USTs led to a rally in the USD against most major currencies. The MYR retraced to 3.9170/USD (-0.28%). Malaysia’s foreign reserve as at 15^th Feb 18 was reported at USD103.6bn (prior: USD103.7bn). This is sufficient to finance 7.1 months of retained imports and 1.1x in short-term external debt.

¨      Govvies trading activities moderated to MYR1.4bn worth of trades after active MYR3.0bn trades recorded the day before. Off-benchmark security MGS 11/21 saw MYR150m change hands stronger at 3.48% (-1.4bps). The benchmark 5y GII 04/22 remained active with MYR102m of trades as it again traded unchanged at 3.89%. The benchmark 7y MGS 09/24, on the other hand, saw MYR140m traded at 4.01%, breaching 4.00% for the first time in 2018.

¨      Secondary flows saw trade volume for corporate bonds/sukuks continued to edge up with c.MYR507m of trades recorded. MYR55m of which were related to the sell down of the primary issuances of AMMB 02/28 and COUNTRY GDN 02/23. PTPTN 03/21 recorded trades of MYR40m at 4.01% (+0.5bps). In the 5y space, GG issuances DANAINFRA 03/22 and DANAINFRA 11/22  saw trades totalling MYR40m crossing at 4.12% (-0.3bps) and 4.18% (+15.1bps) while AAA rated KHAZANAH 03/21 and KHAZANAH 06/22 were traded stronger between -0.1bps to -2.3bps at 4.00% and 4.13% respectively on MYR20m trades each. In the AA space, issuances of Southern Power Generation Sdn Berhad and YTL Power International Berhad recorded trades totalling MYR80m and MYR40m respectively. SPG 04/25 and SPG 04/26 ended the day stronger at 4.77% (-3.8bps) and 4.81% (-8.4bps) whereas YTL Power 05/27 and YTL POWER 10/24 changed hands at 4.89% (-0.1bps) and 4.72% (+2.9bps).

¨      The primary market picked up once more as MYR2.15bn issuances were recorded from six (6) issuers. MKD Kencana Sdn Berhad issued an additional MYR1.2bn from its MYR3.4bn GG sukuk programme, after issuing MYR1bn in Oct 17. The sukuks were issued in two (2) tranches of 5y and 7y maturities with coupons of 4.23% and 4.43%, 62.9bps and 42.4bps respectively over the last traded 5y and 7y benchmarks at issuance. AmBank Islamic Berhad and AmBank (M) Berhad tapped the market for MYR150m and MYR175m AA3 rated 10nc5 subdebt sukuks and bonds respectively while AMMB Holdings Berhad issued MYR325m of A1 rated 10nc5 from its subordinated notes facility. All three (3) securities were issued with coupons of 5.23%, 163bps over the last traded 5y benchmark MGS. Country Garden Real Estate Sdn Berhad on the other hand came to market for MYR200m of 5y sukuks from its new AA3 rated MYR1.5bn sukuk murabahah programme, issuing with coupons of 6.60%, 300bps over the benchmark MGS. Finally WCT Holdings Berhad tapped the market for MYR100m for AA3 rated 7y sukuks. The securities were issued with coupons of 5.55%, 154bps over the last traded benchmark MGS.

APAC USD Credit Market:

¨      US Treasuries rebounded on slight relief. The USTs rallied, led by the belly of the curve, which saw yields on the 2y and 10y USTs dropping to 2.25% (-2.01bps) and 2.92% (-2.93bps) respectively while the 5y UST yields pulled lower to 2.66% (-3.06bps). The 30y USTs retreated from its highs to 3.21% (-1.42bps). Buying interest was seen once again following the post-Fed minutes sell-offs the previous day as market participants digested the price movements and the positive economic data. The lack of further new debt issuances for the week also supported the USTs. Atlanta Fed President Bostic (FOMC voter) highlighted the Fed’s “carefully-calibrated” move to raise interest rates given the improving economic ground and continued to expand on the idea of continued normalisation. Meanwhile, the greenback pared gains, partly by USTs yields retraced, as the DXY plummeted back to 89.7 (-0.29%). Over in economic print, initial jobless claims Jan 18 declined to 222k (consensus: 230k) from the previously revised figure of 229k.

¨      The iTraxx AxJ IG credit spreads edged up to 70.5bps (+1.8bps). Over in CDS space, PCCW-HKT Telephone Ltd. rallied approximately -1.2bps to lead the tightening for the day. Leading the widening, on the other hand, was Singapore Telecommunications Ltd. with spreads increase close to +3.9bps. Other notable corporates include Hutchison Whampoa Ltd, Telekom Malaysia Bhd, Reliance Industries Ltd. and Petroliam Nasional Bhd saw CDS levels rise between +1.4bps and +1.8bps.