Feeble market tone. Today’s 10y GII 9/26 tender garnered a moderate bid/cover of 2.023x on an expected MYR3b size. While the ~2x cover seems decent, by GII standard it is the second weakest GII bid/cover for the year, only better than the 1.915x cover for 20y GII auction back in January when sentiment was fr

Results: GII 9/26 Reopening

·         Feeble market tone. Today’s 10y GII 9/26 tender garnered a moderate bid/cover of 2.023x on an expected MYR3b size. While the ~2x cover seems decent, by GII standard it is the second weakest GII bid/cover for the year, only better than the 1.915x cover for 20y GII auction back in January when sentiment was fragile. Demand was primary local driven although there was a small amount of foreign bid.

·         In fact, the bond had cheapened fairly substantially this week ~16bps, yet the demand wasn’t quite impressive and investors prefer to bid wide with WI rising for a few more bps nearer to the auction close. Successful yields averaged 3.813%, the highest yield was 3.826% and the lowest yield was 3.789%. On relative value play though, this is an attractive option as GII 9/26 is offering an attractive ~20bps pick up over MGS 11/26, much wider from <5bps spread when GII 9/26 was announced that it is eligibility for inclusion to GBI-EM Global Diversified index.

·         Next auction is the reopening of 20y MGS 5/35. We estimate a size of MYR1.5b.

Bid to cover:            2.023x

Highest yield:           3.826%

Average yield:         3.813%

Lowest yield:           3.789%

Cut off:                   50%