Credit Market Watch: Summary for week ending 5-Jun

Credit Market Watch: Summary for week ending 5-Jun

·         MYR Credit:

Ø  The MGS curve was under pressure. Activity in the MYR credit market was lacklustre particularly in the GG and AAA space with total volume at about MYR2.2b compared to a weekly average of MYR3.2b YTD. Selling pressure was seen at the end of the week as offers were plenty but bids were few in the market.

Ø  Padiberas Nasional Bhd's (Bernas) rating was downgraded by RAM 3 notches down to A3 premised on the company transferring a huge cash sum (>MYR700m) from its delisting proceeds to its parent, Tradewinds (M) Bhd, and related parties instead of paring down its own debt. Bernas' gearing meanwhile continued to rise, standing at 1.41x end-Dec 2014. Outlook remains negative reflecting possible further shareholder-friendly moves and the challenging operating environment.

Ø  Golden Agri Resources was put on negative outlook by Moody's citing continued deterioration in credit metrics.

Ø  Relative value: In GG space, judging from last traded yields JKSB'25 offers yield pickup against the 8y Khazanah paper. TBEI and Malakoff Power papers offer some relative value.

·         Asian USD Credit:

Ø  Global bonds selloff was extended. UST curve bear-steepened significantly with the 10y UST rising 29bps WoW. The US labour data seems pointing to the Fed is on track to start hiking rate from September. Nonfarm payrolls added 280,000 jobs in May with 32,000 upward revisions for prior months and wage reported solid gains.

Ø  Majority of the Asian credit yields followed suit. JACI spreads tightened by a few bps. Sovereign INDON traded weak with little bid shown and yields jumped 10-30bps WoW across the curve, while PHILIP also saw its curve moving up by 5-10bps WoW. MALAYS showed some resilience but couldn't avoid the general market selloff with the MALAYS'25 yield rising 9bps WoW.

Ø  New issues: Anhui Transportation (Baa1) issued 3y USD300m at T3+195bps. Woori Bank priced USD500m AT1 bonds at a yield of 5%. Beijing Construction Engineering (unrated) sold USD500m 3y at yield of 3.85%.

·         CDS: Majority of the EM Asia CDS spreads widened WoW, notably Malaysia and Indonesia’s 5y CDS increasing by 5bps to 119 and 174 respectively.