¨ APAC USD Credit Market: Credit held steady. The IG credit spreads was firm at 187.6bps,

17 August 2016

Credit Markets Update

KEV Outlook Slashed to Negative; Tata Motors Upgraded to BB+

¨      APAC USD Credit Market: Credit held steady. The IG credit spreads was firm at 187.6bps, while there was some profit taking in the HY space as average HY bond yields crept 1bp higher to 6.27%, whereas the iTraxx AxJ hovered around the 144.8bps level for the 5^th consecutive day. Over in the US, several hawkish Fedspeak (Dudley and Lockhart) and positive US July industrial production print which grew 0.7% MoM (consensus: 0.3%) drove benchmark UST yields higher by 2bps across the curve, with the 2y rising 2bps to 0.75% while the 10y settled at 1.57%, albeit the disappointing inflation data. Moving to ratings, Tata Motors received an upgrade by S&P to BB+/Sta from BB/Sta driven by the success of its wholly-owned subsidiary Jaguar Land Rover Automotive PLC’s (JLR) product portfolio with strong sales and expansion into new segments, which have strengthened Tata Motor’s overall financial position.

¨      SGD Credit Market: Otto Marine fends off arbitration claims. There was a bull-steepening in the short-to-mid SOR curve, with the 2y falling by 6.8bps to 1.37% while the 5y dipped 4.7bps to 1.61%. Interest appeared to be in higher grade names like CHEUNG, MCTSP and short-to-mid dated HDBSP which was around 5-10bps tighter (according to Bloomberg). Otto Marine (NR) announced that it has successfully defended in arbitration against claims of USD8.8m. In addition, it is pursuing legal action for chartering receivables owing of USD10.5m. Meanwhile, the Singapore July NODX was released this morning at -10.6%, significantly below consensus expectations of -2.5% (June: -2.3%).

¨      MYR Credit Market: KEV on negative outlook. MARC revised Kapar Energy Ventures’ (KEV) outlook to AA+/negative, from stable, premised on the deteriorated operating performance of the underperforming multi-fuel thermal power station, which weakened its liquidity buffer to meet the short-term debt obligations. The govvies ended mixed as 7y MGS rose 2bps to 3.39% while the 10y MGS declined 1bp to 3.47%. The MYR strengthened 0.5% to 3.9852/USD as Brent oil climbed higher to around USD49/bbl (+1.8%). Corporate volume totaled at MYR677m. MAHB 9/16 on MYR90m trades realigned 67bps lower to 3.209%, from its previous trade on 23-Feb. Meanwhile, Aman ’24-’26 declined 2-31bps to 4.198-4.268% on combined MYR125m deals.