Credit Market Watch: Summary for week ending 8-May

Credit Market Watch: Summary for week ending 8-May

·         MYR Credit:

Ø  MGS yields rose slightly WoW in tandem with the selloff of bonds globally. BNM kept OPR at 3.25% last week and we maintain no change in the OPR this year. Trading activity was fairly muted until Friday when market saw better liquidity. GG and AAA traded firmer WoW with spreads tightening 3-5bps. In the AA space, lower rated papers saw some widening at the longer end. There was also buying interest on UEM and WCT.

Ø  Relative value:  FRL'17 could offer some value having last traded cheap by 24bps above our fitted line but in general premiums in yield apply to foreign names. Malakoff'25 and TBEI'25 and '26 also last traded above the line, we think the papers could be at fair value. We do not recommend Mukah given its weak credit profile.

·         Asian USD Credit:

Ø  UST yields moved higher but recovered some losses at the end of the week. The 10y UST wrapped up the week 12bps higher. Asian credit market performed in a similar fashion, succumbed to selloff but on Friday saw better buying especially in some seasoned IG names.

Ø  The same for sovereign INDONs and PHILIPs which saw selling due to UST weakness and recovered losses on Friday but the INDON curve still ended the week 10-15bps weaker and PHILIP curve 5-10bps weaker. Howver, MALAYS curve outperformed, with the MALAYS'25 resilient being 2bps stronger WoW.

Ø  Indonesia sovereign supply in the pipeline, as the country is having investor meetings from 8 May with last stop in Kuala Lumpur on 14th May. The existing INDON'25 last traded at about +175bps as we write.

Ø  New issues China Merchant Bank (USD500m 3y at +147.5bps) and Hsin Chong Construction (USD250m 3y at 8.75%) did well with spreads tightening 10bps.

Ø  PBoC reduced benchmark lending rate by 25bps to 5.10%. This is the third cut accumulating a total of 90bps cut in interest rate in the past 6 months.

Ø  Credit rating: Evergrande Real Estate Group's rating was cut by S&P to B+, citing deterioration of leverage and tight liquidity due to large maturing short-term debt and heightened refinancing risk.

·         CDS: 5y CDS in EM Asia mostly tightened by 2-3bps except Indonesia which was 3bps wider WoW.