Vedanta Resources Upgraded; Good Demand for Industrial Bank USD1bn Maiden Issuance

14 September 2016

Credit Markets Update

Vedanta Resources Upgraded; Good Demand for Industrial Bank USD1bn Maiden Issuance

¨      APAC USD Credit Market: Mixed Asian bond markets as Investors stayed cautious. HY bond yields tightened 2bps to 6.34%, whereas IG spreads and iTraxx AxJ IG widened 2-3bps to 185.2bps and 112.5bps respectively. Separately, US Treasuries weakened in tandem with the global bond market sell-off sparked by concerns on the shift in global central bank’s monetary policy stance with benchmark yields 3-7bps across the curve, particularly the longer dated 10y and 30y, rising 6-7bps to 1.73% and 2.46%. On ratings, Moody’s upgraded Vedanta Resources a notch higher to B1 while S&P hands a positive outlook and affirmed its rating at B premised on expectations that Vedanta’s operating performance will improve on higher metal prices, better financial flexibility and the expected merger of Vedanta Ltd and Cairn India Ltd that should reduce refinancing risk for Vedanta Resources. In the primary space, China’s Industrial Bank (Baa2/NR/NR) via its Hong King branch sold maiden USD benchmarks of USD700m 3y notes at T+113bps against IPT at +145bps area (oversubscribed by 6.0x) and USD300m 5y bonds priced at T+125bps (IPT: +155 area) received BTC of 11x.

¨      SGD Credit Market: Marco Polo Marine seeks extension of maturity. There was a keen bear steepening in the short-to-mid SOR curve, with the 2y rising by 7.5bps to 1.44% while the 5y rose 11.3bps to 1.73% even as the USDSGD weakened by 0.73% to close at 1.366. Interest appeared in yielder names like EZISP and GALVSP while GLPSP Pc17 appeared rangebound after the announcement by Global Logistic Properties (Baa2/-/BBB+) that it was acquiring logistic properties in the US for USD1.1bn, with USD635m funded via debt and the balance via equity. Meanwhile, Marco Polo Marine (NR) announced that it is seeking consent from bondholders of its sole outstanding SGD50m MPMSP 10/16 for an extension in its maturity date.

¨      MYR Credit Market: Local govvies and currency retreat after UST and Brent selloff.  The MGS curve rose 2-6bps with the 3y MGS spiking 6bps to 2.90% while the 10y increased 3bps to 3.56% as MYR depreciated by 1% to 4.108/USD, the weakest level since June. The renewed softness of the MYR could dampened the demand for the MYR3bn 5y MGS auction today with the WI was seen transacted at 3.24% this morning, 5bps above the cash market closing yesterday. Brent oil prices dropped 2.5% to USD47.1/bbl as IEA sees oversupply situation will continue into 2017. Nevertheless, the corporate market was active with MYR600m volumes. Government-guaranteed papers such as Prasarana ’23-’41, PTPTN ’22, PASB ’23-’26 ended mixed (-8bps to +1bp). Elsewhere, the ABS for RCE marketing, Aldzahab ABS 6/19 and 6/23 tightened 43-47bps to 4.407% and 5.228% respectively