FW: RHB FIC Credit Markets Update - 27/2/18

 

 

27 February 2018

Credit Markets Update

           

Focus On 10Y MGS 11/27 Re-Opening; Powell Testimony A Key Watch.

MYR Credit Market:

¨      MGS and MYR steady ahead of CPI. The yields on longer end of the curve were seen declining ahead of the release of Malaysia inflation data tomorrow while US Fed Chair Powell testimony to also be a key watch. The 7y MGS pared losses from the previous week as it moved away from the 4% mark, rallying to 3.97% (-3.2bps) while the 10y MGS saw yields drag lower to 4.05% (-2.9bps). The 3y MGS yields, on the other hand, ticked a tad higher to close at 3.39% (+0.7bps). The MYR performed well against other EM Asia peers, trading higher against the greenback at 3.9030 (+0.4%).

¨      Govvies trading activities remained slow with volume of MYR1.3bn recorded. Most actively traded for the day was the benchmark 10y MGS 11/27 with amount of MYR208m dealt at 4.45% (-2.9bps). The longer-dated benchmark 15y MGS 04/33 attracted decent demand which saw MYR184m change hands, rallying to 4.46% (-2.4bps). Other notable trade was the off-benchmark security MGS 08/23 at MYR114m, closing the day at 3.81% (-2.5bps).  The benchmark 5y GII 04/22 remained active with MYR111m of trades as it again traded unchanged at 3.89%.

¨      Secondary flows saw trade volume for corporate bonds/sukuks continued to edge up with c.MYR507m of trades recorded. Top traded for the day was SEB 12/32 and 6/18 with combined transactions of MYR210m, last traded unchanged at 5.25% for the longer tenure security while the latter rallied -3.8bps to settle at 4.00%. PLUS BERHAD 1/31 and 1/33 saw MYR55m change hands with both yields ending the day slightly lower at 4.85% (-1bp) and 4.94% (-0.5bps) respectively. Other notable trades include MALAKOFF 12/20 and PUBLIC sub notes 10/23 with amounts of MYR35m and MYR30m each. The respective yields rallied to 4.45% (-1bp) and 4.30% (-6.2bps).

APAC USD Credit Market:

¨      US Treasuries yields ticked lower; Focus on Fed Powell testimony. The USTs gained slightly as market participants await for Fed Chair Powell to deliver his semi-annual monetary policy testimony before Congress starting later today. The lower-than-expected new home sales for Jan 18 also supported the USTs, declining to 593k (consensus: 647k) from revised figure of 643k recorded the previous month. The 2y and 10y USTs dropped further to 2.22% (-1.61bps) and 2.86% (-0.4bps) respectively. The USD was largely unchanged at 89.9 (-0.03%). Meanwhile, Fed Governor Quarles spoke yesterday as he resonated a more upbeat view on the current economic conditions in the US while he continued to support gradual rate hike being ‘appropriate’, attributing to healthy labour market and stabilising inflation level to around target level of 2%.

¨       The iTraxx AxJ IG credit spreads rallied to 68.2bps (-2.1bps). Over in CDS space, most corporates recorded compressed spreads overnight. Leading the rally was State Bank of India/London which saw CDs levels fall nearly -4.4bps, trailed by Singapore Telecommunications Ltd. with around -4bps spreads reduction. Seeing a similar decline rate of close to -2.6bps was Export-Import Bank of China and Reliance Industries Ltd. Other notable entities include Telekom Malaysia Bhd, Petroliam Nasional Bhd and ICICI Bank Ltd. where CDS levels dropped between -2bps and -2.4bps. Over in sovereign space, Indonesia rallied around -1.8bps, followed by China close to -1.5bps.