Wednesday, March 1, 2017

All Eyes on Trump’s Congress Speech

1 March 2017


Credit Markets Update
                                               
All Eyes on Trump’s Congress Speech     

MYR Credit Market:
¨      Corporate market ended firmer. Volume totaled MYR397m in the corporate market yesterday with gainers outstripped losers by 18 to 10. Among the top traded, yields for newly issued GovCo 2/32 fell by another 1bp to 4.84%, while we also saw gain in property/construction names such as Gamuda ’18 (-10bps to 4.15%), IJM ’19 (-2bps to 4.27%) and UEMS ’18 (-5bps to 4.58%). Elsewhere, Khazanah-entity, Danga ’20-30 fell 1-5bps to 4.02-4.74%.
¨      Mild profit taking in the govvies market. Benchmark yields rose on moderate trading activities of MYR2.3bn, notably in the 7y which rose 6bps to 3.94%. Newly tendered 30y MGS closing the day flattish at 4.68%. The MYR closed 0.04% weaker at 4.441 against the greenback before Trump’s Congress speech today.
APAC USD Credit Market:
¨      UST curve bear flattened yesterday as investors priced in a higher chance for Fed rate hike in March FOMC meeting, with a probability of 52%, rose from 36% in the previous week. New York Fed President Dudley (FOMC voter) said in an interview with CNN that “the case for tightening had become a lot more compelling in recent months.” Philadelphia Fed President Harker (FOMC voter) also repeated that three rate hikes in 2017 is appropriate. The US economic data were mixed – US Q4 GDP growth was below expectations (actual: 1.9%, consensus: 2.1%), Chicago PMI beat estimates (actual: 57.4, consensus: 53.5). The U.S. Dollar Index fell to 101.12 (-0.01%). UST 2y jumped 6.6bps to 1.26%, while the 10y bond yield climbed to 2.39% (+2.5bps).
¨      In Asia, the IG credit spreads increased a tad (+0.4bps) to 174bps, while the HY space slipped to 6.43% (-6.0bps). The iTraxx AxJ IG index was marginally tighter at 95.8bps (-0.2bps), led by PETMK, Bank of India and SK Telecom Co Ltd. PETMK’s lower CDS spreads were largely attributed to Saudi Aramco’s decision to take up 50% stake in the refinery and cracker assets at the Refinery and Petrochemical Integrated Development (Rapid) project in Johor. Under this partnership, Saudi Aramco will supply up to 70% of the crude feedstock requirements of the refinery.
¨      In primaries, China Aircraft Leasing Group Ltd (CALC)’s financing arm, CALC Bond 3 Ltd (NR/NR/NR) issued two-tranche bond to raise USD500m, selling USD300m 5y at 4.7% compared to its IPT at 5% area, USD200m 7y at 5.5% compared to its IPT at 5.75% area.
¨      Over at rating actions, S&P published GOME Electrical Appliances Holding Ltd’s first time rating at BB/Sta. The company mainly engages in the retailing of consumer electronic products and electrical appliances. The rating reflects competitive business environment in China and its moderate product differentiation, which has resulted in weak profitability. The company’s consolidated gross profit margin was 16.4% for the 1H2016.
¨      Moody’s assigned first-time provisional (P)Baa3 to Yanfeng Global Automotive Interior Systems Co Ltd to reflect the company’s steady earnings and low financial leverage. It is expected to keep its financial leverage low, with debt/EBITDA ratio of about 1.6-1.8x in the next 12 to 18 months

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