Credit Market Watch: Summary for week ending 3-Jul

Credit Market Watch: Summary for week ending 3-Jul

·         MYR Credit:

Ø  MGS rallied after Fitch's unexpected upgrade of Malaysia's outlook to stable and the sentiment spilled over to the PDS market. However, as we write this morning USDMYR broke the 3.80 threshold; MGS market turns bearish with the 10y MGS yield surpassing the 4% handle.

Ø  New issue: Putrajaya Holdings opened book for multi-tranche MYR900m issuance, with 4y-9y tenors, to price as early as today. Sarawak Energy, however, postponed the planned issuance citing market condition factor. Gross PDS supply totalled MYR31.5b in 1H15 and we maintain our forecast of MYR75-85b in 2015.

Ø  Relative value: Cendana Sejati last traded 103bps above our fitted line, largely reflecting the risk of 1) lower credit standing notwithstanding its enhanced credit from the collateralization of credit sales receivables of civil employees, 2) short history of the originator Masraf Group and 3) inherent yield premiums for ABS structure in MYR credit.

·         Asian USD Credit:

Ø  Greeks voted NO to the austerity package prolonging the debt crisis. UST yields wrapped the week stronger amid teething risk aversion sentiment while JACI spreads were a tad tighter.

Ø  Asian credit was quiet in a holiday shortened week. Generally there was no big risk-off flight and banks, tech and Chinese AMC remain in demand and Indian financials were also well bid.

Ø  Sovereigns INDON and PHILIP curves shifted downward by approx. 3-8bps. MALAYS 25 and PETMK spreads continue to trade tighter due to short covering by market players. OGIMK'23 didn't seem troubled by the 1MDB related article on WSJ, stronger by 14bps WoW.

Ø  Credit rating: Country garden's debt rating was upgraded by Moody's to Ba1 from Ba2, citing strengths in funding and financial management through onshore term funding and equity raising from Ping An Insurance.

·         CDS: EM Asia’s CDS were between 3bps down to 3bps wider. At some point Malaysia CDS tightened by as much as 10bps after Fitch’s outlook increase, but the rally was undone by a 1MDB related article on WSJ.