Oil Prices Surge on OPEC-Russia Talks; Noble Slashed Two Notches to B2/Negative

16 August 2016

Credit Markets Update

Oil Prices Surge on OPEC-Russia Talks; Noble Slashed Two Notches to B2/Negative

¨      APAC USD Credit Market: Asian bond markets grinded tighter with IG spreads narrowing nearly 1bp to 188bps, while speculative bond yields lost 3bps to 6.26%, although the iTraxx AxJ was relatively unchanged at 144.4bps. Elsewhere, benchmark USTs lifted 2-5bps across the curve fueled by the recovery of oil prices on hopes of a Russia/major oil producers agreement (Brent: +2.9% to USD48.3/bbl) and the overnight rally in US equities. Turning to ratings, Noble Group was downgraded by Moody’s to B2/Neg from Ba3/Neg premised on its weaker liquidity position given its limited ability to generate positive operating cash flows amid the challenging commodity environment, further exacerbated by large debt maturities in 2Q17. In the primary markets, China Aircraft Leasing Group (NR) received USD1.2bn orders for USD300m 5y bonds at 4.90% against IPT at 5.25% area.

¨      SGD Credit Market: Mapletree Commercial prints 10y. The short-to-mid swap curve bull flattened, led by the 5y which fell 4.1bps to 1.65% while the 2y dipped 1bp to 1.44%. Vallianz announced its 2Q16 results which saw revenue decline 2.1% YoY to USD63.7m while net profit fell 13% to USD4m, mainly due to a USD1.62m impairment charge relating to its Swiber exposure. In the primaries, Mapletree Commercial Trust (Baa1) printed a SGD175m 10y at 3.11%. Looking ahead, investors will be eyeing the Singapore July NODX that will be released tomorrow (consensus: -2.5%; June: -2.3%).

¨      MYR Credit Market: Govvies advanced along with MYR following subdued US retail sales print and higher Brent prices. Yields for 3y-10y MGS benchmark fell 3-4bps with notable interest towards the long end of the curve. Recently auction 15y GII ended firmer at 4.107%, from the average tender yield of 4.16%. The higher oil prices supported the MYR which strengthened 0.5% to 4.00/USD yesterday. Activity in the corporate market was moderate at MYR456m. Most active was RHBINV sub-debt 12/22c17 with MYR75m trades settled at 4.25% (-0.5bps); while DanaInfra 11/34 slipped 6bps lower to 4.635% on MYR50m trades.