IOI Returns to Baa2/Neg; Westpac Priced USD5bn Senior Bonds

12 August 2016

Credit Markets Update

IOI Returns to Baa2/Neg; Westpac Priced USD5bn Senior Bonds

¨      APAC USD Credit Market: : Mixed Asian bond markets as IG spreads rose marginally to 191.8bps, whereas speculative bond yields extends rally (-1.2bp) to 6.32% while Asian CDS was flat at 114.2bps. Benchmark UST’s jumped 4-7bps driven by the advance in US equities and improving US economic data as well as higher oil prices (Brent: +4.5% to USD46/bbl). The UST 2y soared 6bps to 0.74%, while 10y climbed 5bps to 1.56%. Turning to primaries, HNA Group (Unrated) priced USD300m 3y bonds at 6% against IPT of 6.25% area, while Westpac (Aa2/AA-/AA-) sells USD5bn 5-part bond deal with USD1.5bn 3y bond priced at T+75bps (IPT: +90bps), USD500m 3y FRN and USD500m 5y at 3mL equiv, USD1.5bn 5y bond at T+87.5bps (IPT: +100bps), and lastly, USD1bn 10y bond at T+115; IPT at T+125bps area.

¨      SGD Credit Market: Olam’s 2Q16 volume growth offset by lower commodity prices. The short-to-mid SOR curve steepened, with the 2y falling by 2.2bps to 1.44% while the 5y dipped 0.7bps to 1.72%. High grade names continued to see interest, with SPSP, HDBSP and CHEUNG closing 5-10bps tighter (according to Bloomberg). Olam International (NR) announced its 2Q16 results, with revenue increasing 3.5% YoY to SGD4.98bn despite a 20% rise in sales volumes which was offset by lower commodities prices (such as on almonds, cotton), while net income rose 21% to SGD111.5m. Centurion Corp’s (NR) 2Q16 revenue increased 9% to SGD28.7m, though net income fell 14% to SGD8.4m mainly due to its 87% growth in interest expense from its SGD65m CENSP 7/18 issuance to finance recent acquisitions. Looking ahead, Singapore June Retail Sales will be released on Monday (prior: 3.0%).

¨      MYR Credit Market: Little change in the govvies and MYR before 2Q GDP data. The 3y and 10y MGS declined 1bp to 2.92% and 3.60% respectively, while the MYR ended the day at 4.00/USD. Malaysia’s economic growth expected to ease to 4.0% in 2Q16, from 4.2% the previous quarter, weighed down by the drop in CPO output despite the strong IPI growth of 5.3% in June (consensus: 2.5%). Corporate market was active with MYR879m transacted yesterday where 40% of the trades were placed in short-dated Cagamas papers. Cagamas 11/16-3/19 ended firmer as yields realigned 3-39bps lower to 3.00-3.535%. The national mortgage corporation announced in a press release that it has issued MYR200m Conventional MTN at Swap+29bps. Meanwhile, MISC Bhd was upgraded to BBB+/Sta by S&P premised on its steady cash flows, moderate capital spending and prudent financial policies. Moody’s concluded IOI Corp’s rating at Baa2/Neg (from review for downgrade) after RSPO lifted its suspension on IOI’s palm oil.