APAC Primaries Stayed Busy; Markets Eye Friday’s US NFP Print

7 March 2017

Credit Markets Update

                                               

APAC Primaries Stayed Busy; Markets Eye Friday’s US NFP Print

MYR Credit Market:

¨      Corporate market ended firmer. Volume totaled MYR323m in the corporate market yesterday with gainers outstripped losers by 9 to 6. Among the top traded, MDV ’20 which saw MYR40mn traded and saw yields fall -15bps to 4.00% and Cagamas 5.01% 08/17 which fell -31bps to 3.99%. The day also saw trades in property/construction names trade mixed such as B Land 12/19 (-3.8bps to 4.47%), and Gamuda 03/20 (+1.3bps to 4.417%). Elsewhere, traded names were EKVE 01/26 (unchanged at 4.52%), STMSB 06/17 (-5.1bps to 4.078%) and TTM 11/25 (-6bps to 4.428%). Trades were mainly concentrated on the 3Y and 10Y segments.

¨      Govvies market largely unchanged. Benchmark yields rallied on stronger trade activity of MYR 7.7bn, with the rally concentrated on the longer end where the 10y MGS rallied -2.7bps to 4.15% and the 15y MGS -2.6bps to 4.55%. The 3y MGS fell -1.3bps to 3.426. The GII moved on the opposite direction with the longer end yields remaining largely unchanged increasing the spread over the MGS. Trading was concentrated on the short end as MGS 03/17 and MGS03/18 concentrated MGS trading (+2.5bps and -4.1bps respectively), whereas the GII concentrated on GII 04/20 trading -3.6bps. The MYR rallied too closing at 4.448 (+0.14%) against the USD.

APAC USD Credit Market:

¨      Treasury yields edge higher on rising expectations for a March rate hike, extending fall as Fed hawkish chorus continued. 10y UST yields gained 2bps to c.2.50%, whereas the 2y stayed flat at c.1.30% as the Fed futures market implied probability inch up to 96%, largely ignoring the latest North Korean ballistic missile tests. On the data front, Jan factory orders rose 1.2%, larger than consensus expectation of 1% (prior: 1.3%), while durable goods orders rose 2% (consensus: 1.0%, prior: 1.8%).

¨      Asia credit markets start the week cautiously. IG credit spreads and average speculative bond yields rose 2-3bps overnight to 171.2bps and 6.5% respectively as investors take profit ahead of the Fed FOMC meeting next Thursday, while new supply continued to flood the markets. In line with the weaker credit segment, Asian IG CDS spreads rose 1bp to 95.3bps with Korean credits i.e. Korean Development Bank, Hyundai Motor, Samsung Electronics and EXIM Korea (gaining 3-5bps) representing the bulk of the index underperformers after North Korea fired 4-ballistic missiles into sea near Japan.

¨      Primaries stayed active, Noble Group (B2/B+/BB+) received USD2.4bn orders for its USD750 5nc3 bond priced at 8.75% compared to IPT at 9% area. ICBC International Holdings (A1/NR/NR) sold USD650m 3y bonds at T+110bps, 15bps inside of IPT, while China SCE property (expected rating: B2/B-/NR) sets final guidance for USD200m 5nc3 bond at 5.875%, or at IPT.

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