Jaded Credit Markets as Oil Flirts Around USD45/bbl

10 August 2016

Credit Markets Update

Jaded Credit Markets as Oil Flirts Around USD45/bbl

¨      APAC USD Credit Market: Relatively muted credit markets. The iTraxx AxJ trimmed 1.3bp to 113.8bps while IG credit spreads and speculative bond yields marginally tightened 1-2bps to 191bps and 6.35% respectively. Asian equities were mostly higher as Brent oil prices temporarily rose back above USD45/bbl (before settling at USD44.9) on news that OPEC will hold an informal meeting next month (26-28 Sept). Elsewhere, USTs yields strengthened especially at the belly-to-long-end which narrowed 4-5bps with the 10y at 1.55%, while the shorter-dated UST 2-3y’ dipped 1-2bps. In the primary space, Chongqing Nan’An (NR/BBB+/BBB+) priced USD200m 10y bonds at 4.8% against final guidance set at 4.90%.

¨      SGD Credit Market: Otto Marine launched claims of USD6m owing. There was a flattening in the SOR benchmark curve, with the 2y rising by 5.3bps to 1.52% while the 5y declined 1.8bps to 1.81%. Interest was observed in yielder property names likes CTRPIJ and GALVSP as well as IG papers like FCTSP and CHEUNG. Otto Marine (NR) announced that it has commenced legal proceedings for amounts owing of around USD6m for unpaid chartering services while Swiber updated that the total sum of legal claims received is approximately USD99m. Looking ahead, investors will be eyeing Singapore’s preliminary 2Q16 GDP estimates tomorrow (consensus: 2.2%).

¨      MYR Credit Market: Corporate flows tripled to MYR821m led by PASB with short-end 6/18 decreasing 19bps to 3.501%, while 2/23-2/26 rose 2-4bps to 3.937-4.178%. Benchmark govvies ended mixed on quiet trading session of below MYR1bn volume. MYR strengthened 0.2% to 4.02/USD as the unscheduled OPEC meeting supported oil prices, trading around the USD45/bbl level this week, compared to the average of USD43/bbl last week, with the Malaysian 5y CDS remained flat at 127bps.