BOE Slash Rate to 0.25%; Investors Eye July NFP; MISC 2Q16 Net Profit Jump 78% YoY

5 August 2016

Credit Markets Update

BOE Slash Rate to 0.25%; Investors Eye July NFP; MISC 2Q16 Net Profit Jump 78% YoY

¨      APAC USD Credit Market: Asian Bond Markets stay vigilant ahead of US jobs numbers. HY bond yields resumed on its tightening path, grinding approximately 2bps lower to 6.36%, IG credit spreads widened 2bps to 201.5bps. The iTraxx AxJ was mostly unchanged at 120.9bps despite Asian equities settling higher ahead of the BOE MPC meeting, while Brent recouped its earlier losses to regain 2.8% to USD44.3/bbl. Nevertheless, the BOEs’ decision to slash key interest rates and expand stimulus package drove the rally in benchmark USTs as yields strengthened 2-5bps, with the 10y at 1.50%. Looking ahead, investors will focus on the key US July NFP and unemployment.

¨      SGD Credit Market: Short-term rate rose with the 2y SOR increasing 2.4bps to 1.49% as the SGD traded steadily at 1.34/USD level. Fraser Commercial Trust (Baa2/NR/NR) printed its maiden SGD100m 5y Bonds at 2.835% which was mainly subscribed by banks, with proceeds earmarked for refinancing its existing borrowings. Meanwhile, Genting Singapore’s (Baa1/NR/A-) net profit for 1H16 fell by 43% YoY to SGD59m as the Asian gaming market continues to face challenges. The perpetual bonds of the gaming operator callable in 2017 were seen quoted at 5.13/4.31%.

¨      MYR Credit Market: 3-5y MGS yields jumped after lackluster auction. The 7y MGS 8/23 Reopening auction came in at average yield of 3.483%, with weaker BTC of 1.58x against 2.04x previously. Trading in MYR credits remained above-average at MYR533m ahead of the trade balance report (today). Among the top traded were the Cagamas 8/17-7/18’ which closed 5-35bps lower at 3.250-3.499%. Elsewhere, MISC (AAA) reported a 78% YoY jump in Q216 net profit to MYR1.35bn, mainly attributed to the MYR847.3m net gain on acquisition of subsidiaries; although revenue fell 8% YoY to MYR2.39bn on the back of slower sales from heavy engineering segment (-49.6% YoY).