Spreads Widen Ahead of Jobs Data; Tianjin Rail Priced USD Notes; ICBC Leasing Begins USD Roadshow

5 May 2016

Credit Markets Update

           

Spreads Widen Ahead of Jobs Data; Tianjin Rail Priced USD Notes; ICBC Leasing Begins USD Roadshow

¨      APAC USD Credit Market: Spreads widened over concerns regarding possible June rate hike and upcoming US jobs data as CDS and IG rose 2bps to 146.3bps and 215.9bps while HY jumped 5bps to 7.27%. Yields of benchmark USTs increased by c.2-3bps with 10y at 1.78% following better-than-expected April services PMI of 52.8 (consensus and prior: 52.1) despite weak ADP employment change of 156k vs. forecasted 195k. Meanwhile, Rail Transit International with a Keepwell Deed from Tianjin Rail Transit (As2/A-/A) priced USD200m at T3+162.5bps vs. IPT+190bps area and USD300m at T5+182.5bps vs. IPT+210bps area with combined BTC in excess of 4.8x. Elsewhere, ICBC Financial Leasing (A2/A/A) will begin its roadshow on 6 May for a proposed USD senior offering.

¨      SGD Credit Market: Sembcorp Industries 1Q16 results dragged down by O&M. There was a flattening in the short-to-mid SOR curve, with the 2y rising by 2.7bps to 1.63% while the 5y rose by 0.75bps to 2.0%. Interest was seen in VANKE and CENCHI as well as Bank B3T2 names like BNP and ABNANV which tightened by c.5-10bps (according to Bloomberg). Sembcorp Industries 1Q16 revenue fell by 19% YoY to SGD1.9bn while net profit dipped 30% to SGD131m largely due to the O&M segment (via its 61% owned subsidiary Sembcorp Marine) where net income contribution dropped 48% to SGD33.5m. Nevertheless, the bottom line loss was mitigated somewhat as its utilities’ net profit segmental contribution was largely unchanged YoY at SGD75.2m.

¨      MYR Credit Market: MGS curve moved higher amid weakening MYR. The 3y, 7y and 10y benchmarks rose 2-3bps to 3.29%, 3.43% and 3.88% respectively; USD continued to gain strength against the MYR to 3.9925% (+1.56%); while the WI for 15y MYR2.5bn GII Reopening was seen quoted higher at 4.59/39% (from 4.45/25% the previous day). Corporate activity tripled to MYR659m led by banking papers. AMMB Senior 8/17 ending the day at 4.452% (+1.3bps from MTM) on MYR155m transactions, about 70bps lower than the previous odd-lot trad. Meanwhile, RHB LT2 5/22c17 rose 3bps to 4.352% with MYR70m changed hands.