IG Spreads Tightened Ahead of FOMC Minutes; Kexim Issued USD2.5bn Senior

19 May 2016

Credit Markets Update

           

IG Spreads Tightened Ahead of FOMC Minutes; Kexim Issued USD2.5bn Senior

¨      APAC USD Credit Market: Sideways as Asian CDS and IG spreads tightened marginally by c.1bp to 142.7bps and 210.9bps respectively while HY was unchanged at 7.11%, before the release of FOMC minutes this morning. Meanwhile, Treasuries weakened as benchmark yields surged 6-8bps with 10y at 1.85% following Fed minutes which signaled chance of June rate increase should the economy improve. Primary saw Kexim (Aa2/AA-/AA-) raising USD2.5bn via a 3-tranche issuance; (i) USD500m 3y FRN at 3mL+70bps, (ii) USD1.0bn 3y at T+77.5bps vs. IPT+95bps area and (iii) USD1.0bn 10y at T+82.5bps vs. IPT+105bps area. On the rating front, Chinese property developer Greentown was downgraded to BB- from BB by S&P with a stable outlook to reflect expectations of high leverage and negative operating cash flows over the next 12 months as a result of aggressive growth appetite.

¨      SGD Credit Market: Vallianz wins USD210m orderbook.  The short-to-mid SOR curve widened by around 5bps, with the 2y and 5y closing at 1.60% and 1.93% respectively. Interest was seen in perpetuals like AREIT Pc20 and FCLSP Pc20 as well as HY names such as EZISP, CENSP and ASPSP as stronger oil prices (Brent closed at USD48.9/bbl) renewed risk-on sentiment. Vallianz Holdings announced 13 new long term charter contracts for offshore support vessels worth USD210m, pushing its orderbook to USD1.2bn (c.5x FY2015 revenue). In the primaries, Oxley Holdings is reopening its 5.15% OHLSP 5/20 at 100.0.

¨      MYR Credit Market: Corporate market ended generally flat in tandem with the local govvies before the MPC meeting to be held later today. Active flows of MYR631m were seen in the PDS market – notably, PASB 9/20 fell 0.5bps to 3.864%, while BGSM 12/16 inched 1bp lower to 4.05%. On the govvies front, benchmark MGS yields moved -1bp to +1bp with the 10y closing at 3.83% (-1bps). USDMYR weakened 0.8% to 4.0503 following the hawkish comments from several Fed members; while Malaysia CDS increased 6.5bps to 162.9. In the primary market, Cagamas (AAA) reopened tranche 7/19 with new issue of MYR465m at coupon of 5.28%. Meanwhile, Petronas’ pretax profit plunged 60% YoY in the 1Q16 to MYR6.8bn amid the prolonged subdued oil prices.