APAC USD Credit Market: The iTraxx AxJ IG crept up 1bp to 118.1bp, while Asian credits markets were wider by 1bp as observed in IG credit spread

18 October 2016

Credit Markets Update

Primary Market Activity Picks Up

¨      APAC USD Credit Market: The iTraxx AxJ IG crept up 1bp to 118.1bp, while Asian credits markets were wider by 1bp as observed in IG credit spreads and average non-IG bond yields amid the weak sentiment. Investors turned to safe haven USTs following the decline in US and European equities and weaker oil prices (Brent: -0.8% to USD51.5/bbl). 10y UST yields shed -3bps to 1.77%, while the 2y settled -2bps lower at 0.81%. On ratings, Moody’s takes action on nine mid-to-small Chinese banks attributed to the growing risks in their funding profiles and increasing asset quality pressure (please refer to table 3 below). Turning to the primary markets, Korea National Oil Corporation (Aa2/AA/AA-) sold USD350m 5y bonds at T+83bps (BTC: 1.97x) compared to IPT at +100bps area; USD650m 10y bonds at T+80bps (IPT at +100bps area/BTC: 1.49x). ICBC (issue rating: A1/NR/NR) priced USD1bn 5y bond at T+120bps against IPT at +150bps.

¨      SGD Credit Market: Ezra seeks to waive bond covenants. There was a rise in the short-to-mid swap curve, with the 2y and 5y SOR rising by between 1-4bps to close at 1.41% and 1.80% respectively. Papers such as BTHSP and GALVPS appeared tighter while BAERVX 5.9% appeared wider post the recent issuance of BAERVX 5.75%. Ezra Holdings (NR) is seeking consent to totally waive its financial covenants, which include its EBITDA Interest Coverage, as well as to allow the company to begin the debt rescheduling and deferral negotiation process.

¨      MYR Credit Market: Muted govvies market as MYR slipped further. Govvies volume totaled at MYR1.9bn with the 5y MGS was the most active, ended the day 1bp wider at 3.33%. The MYR weakened by 0.4% to 4.219/USD as dovish Yellen’s remarks on Friday was counterbalanced by the better US retail sales in Sep. Corporate activities were moderate at MYR600m yesterday with about a third of the trading flows were concentrating in the government-guaranteed bonds – notably, PTPTN 12/24 unchanged at 4.03%, while SME Bank 3/19 spiked 20bps to 3.73%. Elsewhere, PLUS ‘30-’31 ended flat to +5bps at 4.43%-4.45%.