Credit Market Watch: Summary for week ending 14-Aug

Credit Market Watch: Summary for week ending 14-Aug

·        MYR Credit:
Ø        Selloff on MGS persisted as MYR kept depreciating, with market panicking Friday morning when MYR dived from 4.011 to 4.127. MGS curve bear flattened with front end yields higher by 19-26bps WoW, pushing short-dated credit spreads tighter. Against this backdrop, PDS market remained very quiet with little activity, and yields mostly up by 1-8bps WoW.  
Ø        With MYR languishing around 4.10-4.12 as we write, the bearish sentiment in the market is still intact and liquidity will likely remain thin.
Ø        Relative value: Although Bright Focus'30 and '31 last traded 18-31bps above our fitted line, we would be cautious about its credit strength given high leverage.
·        Asian USD Credit:
Ø        Brent crude price remains depressed and last seen at USD48.6/bbl; WTI price sank to a low of USD42/bbl.
Ø        Recent re-centring of and devaluation of USDCNY have raised some concern about regional currencies, adding salt to the already wounded MYR. Asian credit spreads widened with JACI composite +8bps, JACI IG +7bps and JACI HY +13bps WoW. Overall liquidity was thin.
Ø        Sovereigns' performance was mixed, with INDON and MALAYS again the underperformers higher by approx. 5-10bps in yields WoW, while PHILIP was comparatively resilient. Malaysian names remain under pressure, with OGIMK'23 up approx. 37bps WoW to 7.46% as we write.
Ø        IG oil & gas names were better offered due to weak oil price, but tech names like TENCNT, BIDU and BABA saw buying interest helped by Tencent's strong results.
Ø        Rating changes: Noble Group was put on negative outlook by Moody's, higher leverage, lower interest cover and weaker liquidity. Maoye was downgraded to Ba3 from Ba2 due to the expectation of weak revenue growth and elevated debt leverage.
·        CDS: Broad widening of EM Asia CDS spreads with Indonesia, Malaysia and Thailand the underperformers, widening by 15bps, 22bps and 22bps respectively WoW.