Remain-Biased Drives Spread Tighter in Asia; Wuxi Construction Priced USD Deal at T3+240bps

21 June 2016

Credit Markets Update

Remain-Biased Drives Spread Tighter in Asia; Wuxi Construction Priced USD Deal at T3+240bps

¨      APAC USD Credit Market: Asian CDS and spreads tightened by c.4-5bps to 142.9bps and 218.7bps respectively, while HY edged 3bps lower to 6.94%. Yields of benchmark Treasuries climbed 5-8bps with 5y and 10y at 1.18% and 1.69% respectively as polls indicated declining support for a Brexit in the upcoming 23 June referendum. Attention tonight will be on Yellen’s Congressional testimony as market looks to gauge the global economy and Fed’s rate normalization plan. In the primary market, Wuxi Construction issued USD300m 3y bond (NR/BBB/BBB+) at T+240bps, or 20bps inside IPT after garnering BTC in excess of 4.7x.

¨      SGD Credit Market: Ezra secured USD300m new orders. There was a mild steepening in the short-to-mid curve, with the 2y falling by 1bp to 1.58%, while the 5y rose 0.8bps to 1.93%. REIT names such as AREIT and LMRTSP were around 5-8bps tighter (according to Bloomberg) while interest was also seen in longer dated TEMASE papers. Ezra (NR) announced that it had won around USD300m in new deepwater projects in the Gulf of Mexico, Southeast Asia and West Africa while Global Logistic Properties (NR) stated that it had signed new leases totaling 1.1m sqft with five companies in China. In the pipeline, First REIT (NR) is currently meeting investors for a planned issuance.

¨      MYR Credit Market: Belly of the MGS curve moved -2bps to -4bps, with the 5y and 7y closing at 3.47% and 3.75% respectively; while the other end of the spectrum were relatively flat. Investors focus was on the shorter-dated govvies in view of potential risk from EU Referendum on Thursday. Corporate bond flows were broadly led by TBEI 3/28-9/27 (AA3) and Cagamas 10/16–11/28 (AAA) with combined trades of MYR140m and MYR115m, at yields of 4.902%-4.935% (-1.2bps to -0.8bps) and 3.334%-4.550% (-5.5bps to +3.6bps) respectively. Elsewhere, PR1MA plans to issue up to a MYR15bn sukuk to fund its affordable housing programme until 2020 where PR1MA will request government to guarantee the sukuk.