APAC Bond Markets Firmer on Improved Sentiment

5 October 2016

Credit Markets Update

APAC Bond Markets Firmer on Improved Sentiment

¨      APAC USD Credit Market: Asian Credits grind tighter. Average HY bond yields narrowed 2bps to 6.35%, while IG spreads were firm at 190.5bps. Similarly, Asian CDS shed 1bp to 116.7bps. Elsewhere, UST yields jumped 3-7bps across the curve on reports that the ECB could taper bond buying, hawkish Fedspeak and fading fears over Deutsche Bank’s situation. UST10y edged 6bps higher to 1.68%, while 2y rose 3bps to 0.82%. In the primaries, Korea Housing Finance (issue rating: Aa1/NR/NR) priced USD500m 5y covered bonds at T+85bps against IPT at T+100bps area. Separately, Tenaga Nasional Bhd (A3/BBB+/BBB+) plans investor meetings from today for a potential USD sukuk deal, whereas International Container Terminal Services Inc (NR) will meet investors in Singapore and Hong Kong for a USD perp.

¨      SGD Credit Market: Sembcorp Marine agrees to delayed rig delivery. There was a steepening in the short-to-mid benchmark SOR, with the 2y falling by 1.8bps to 1.40% while the 5y rose 1.5bps to 1.75%. Yesterday yielder names like HYFSP, EZISP and BTHSP appeared tighter. Sembcorp Marine (NR) announced that it has agreed to an extension again of a standstill agreement with North Atlantic Drilling Ltd for the delivery of a drilling rig until Jan-2017, which is the third extension announced.

¨      MYR Credit Market: Gain in newly issued UMW. Trading volume totaled at MYR644m yesterday. Notably, the MYR700m new issued of UMW 10/21-10/26 were seen trading 7bps below-coupon at 4.95-5.15% on its debut trading day. Elsewhere, PLUS ’21-’37 on combined MYR120m trades moved sideways to close at 3.86%-4.81% (unchanged to -2bps). Govvies ended firmer as yields declined 1-2bps across the 3y-10y benchmarks despite weaker MYR. The local currency weakened 0.25% to 4.138/USD following the better-than-expected US manufacturing number which increase the probability of a rate hike by the Fed this year. Meanwhile, BNM opens the tender for MYR3.5bn New 3.5y GII 4/20 with the WI quoted at 3.25/15% yesterday (auction closing tomorrow on 6-Oct).