Credit Market Watch: Summary for week ending 26-Jun

Credit Market Watch: Summary for week ending 26-Jun

·         MYR Credit:

Ø  MGS ended the week on a lacklustre tone and yields unchanged WoW. PDS market followed with thin liquidity. Trades done were mostly around MTM levels. Krung Thai bank sold its AA2 rated Basel III Tier 2 subdebt at 5.10% with an upsized issuance of MYR1.0b.

Ø  It was reported that Manjung's new Unit 4, Jimah's Unit 1 and Kapar Energy experienced unplanned outage in early June but the reason behind it remains unclear. Manjung Unit 4 likely still undergoing teething issues.

Ø  We highlighted some concern on UMW's rating outlook due to weaker financial metrics in 1Q15 and challenging business conditions in the near term. But given its strong liquidity position, we are not worried on its repayment ability for outstanding bonds which have short maturities (2015-2017).

Ø  Relative value: YTL Power papers still seem to offer some value though mindful that credit profile may change if it acquires Edra Global Energy's power assets.

·         Asian USD Credit:

Ø  Greek debt crisis continues to escalate as Greece imposed capital controls: overseas transfer of cash is not allowed and daily cash withdrawals limit at EUR60 per day. Greek banks to stay closed until at least 6th July after the planned referendum on the 5th July.

Ø  China's PBoC slashed 1-year lending rate by 25bps to 4.85%, the 4th cut since November 2014 lowering rate by a total of 1.15% from 6.00% before the cut started.

Ø  UST yields jumped WoW for the week ending 26 Jun but amid Greek debt tension the 10y UST yield rallied strongly during Asian morning hour to 2.30% as we write.

Ø  Sovereign: The INDON curve steepened with longer-end yields rising 5-10bps WoW but outperformed the UST. Similar tone was shared in PHILIPs and MALAYs.

Ø  Asian credit traded in a somewhat cautious tone. There were a slew of new issuances: China Life issued USD1.28b 60NC5 bonds at 4% tighter from IPT of 4.375%; Baidu priced USD750m 5y at +135bps and  USD500m 10y at +175bps; Singtel sold USD500m 10y bonds at +97.5bps from IPT of +110bp; BOC sold USD1b 3y at +115bps, USD800m 5y at +125bps and USD500m 10y at +157.5bps.

·         CDS: EM Asia’s 5y CDS widened by 1-7bps WoW with Malaysia rising most by 7bps to 133bps.