· Moderate bids. Today’s 10y MGS 11/26 reopening drew a modest bid/cover of 1.752x

Results: MGS 11/26 Reopening

·         Moderate bids. Today’s 10y MGS 11/26 reopening drew a modest bid/cover of 1.752x on an expected MYR3b size. Market demand in this auction is substantially weaker than the 2.49x BTC in the last 15y GII auction although is better than the 1.58x BTC in the 7y MGS held in early August. Unattractive yield levels asides, the recent GII inclusion in the GBI-EM Global Diversified index is GII positive, but slightly at the expense of MGS on foreign flows in the medium to longer term due to the 10% country cap as mentioned in our report last week.

·         Tighter GII-MGS spreads. Successful yields averaged 3.563%, north of the pre-auction WI of around 3.555/550, which we think may be an indication that market is not keen at current levels and prefer to bid wide from the WI range instead. The highest yield was 3.578% and the lowest yield was 3.530%. Since the GII index-inclusion announcement, the 7y and 10y benchmark GII-MGS spreads have tightened to <5bps from around 15-20bps previously.

·         Next auction is the reopening of 5y MGS 11/21. We estimate a size of MYR3b.

Bid to cover:            1.752

Highest yield:           3.578%

Average yield:         3.563%

Lowest yield:           3.530%

Cut off:                   33%

MGS and GII auction results/supply pipeline 2016

Thank you.