SGSPAA Priced USD500m 10y Bond at T+175; Wilmar 2Q16 Profit Warning; IOI Corp Loses Cargill following RSPO Suspension

20 July 2016

Credit Markets Update

SGSPAA Priced USD500m 10y Bond at T+175; Wilmar 2Q16 Profit Warning; IOI Corp Loses Cargill following RSPO Suspension

¨      APAC USD Credit Market: Quiet session for markets. The iTraxx AxJ traded 1bp wider to 119.7bps, generally tracking weaker Asian equities performance. The lackluster performance rubbed off onto Asian bond markets as IG spreads were flat 202.4bps, although speculative bond yields shed 2bp to 6.36%. Separately, UST yields declined 2-3bps from the belly-to-long end of the curve as the 10y USTs rallied 3bps to 1.55% amid the slump in US stock markets despite the upbeat US housing data i.e. June Housing Starts gained 4.8% MoM (consensus: 0.2%; prior: -0.3%), while June Building Permits were similarly higher at 1.5% MoM (consensus: 1.2%; prior: 0.7%). Turning to primary markets, SGSP Australia Assets (SGSPAA; Issue rating: A3/BBB+/NR), 60% owned by State Grid Corp of China (Aa3/AA-/A+) and 40% by Singapore Power (Aa2/AA/AA-) received 7.4x BTC (mainly taken up by fund managers) for USD500m Reg S 10y bonds at T+175 against IPT at +200bps area. India’s upstream O&G company, Oil and Natural Gas Corp (Baa2/BBB/NR) received over USD875m orders for USD400m 5.5y bond at T+175 against IPT of 195bps area and USD1.4bn orders for USD600m 10y bonds at T+220bps, IPT was seen +235bps.

¨      SGD Credit Market: Wilmar announces 2Q16 losses. There was a flattening in the short-to-mid swap curve, with the 5y falling 1.5bps to 1.61% while the 2y rose 0.5bps to 1.33%. Interest was seen in yielder names like TATAIN, NOLSP and GALVSP even as Brent oil prices stabilised around the USD46/bbl level this week. Wilmar International Ltd (NR) released a profit warning for its 2Q16 results, where it expects to report net losses approximating USD230m. CapitaLand Commercial Trust 2Q16 revenue fell 2.2% YoY to SGD67.6m due to lower occupancy rates at 97.2% (1Q16: 98.1%; 2Q15: 98%), while its net income (excluding fair value gains of properties) dropped 3.3% to SGD74.3m.

¨      MYR Credit Market: RSPO suspension costs IOI Corp another client. MGS curve steepened with MGS3y plunging 8bps to 2.81%, other benchmarks closing near to previous level while MYR weakened further to 4.0030/USD (+0.64%). BNM has opened the auction for MYR3.5bn GII5y Reopening where the WI was seen last quoted at 3.38/33% yesterday. IOI Corp (Baa2/BBB-/NR) loses another client as US-based Cargill Inc reportedly suspends sourcing palm oil from IOI Corp following the RSPO suspension on the 1-Apr. The Malaysian planter was placed under review for downgrade by Moody’s on the 11-May in relation to the suspension. Trading activity in the corporate market increased by 34% to MYR630m yesterday. Among the top traded were MAHB Pc24 (-3bps to 4.699%), CIMBI sub-debt 9/22c17 (-19bps to 3.996%) while government-guaranteed MDV 3/23 declined 41bps from coupon to 3.906% on its debut trade.