GovCo and BPAM Taps Primary; Malaysian Banks Posts Mix Results

1 March 2017

Credit Markets Weekly

GovCo and BPAM Taps Primary; Malaysian Banks Posts Mix Results

SUMMARY:

¨      MYR Credit Market: Govvies yields lowered across the curve as FOMC minutes provide little indication on a March rate hike. The MGS rallied with the 3y slipping 4bps WoW to 3.32%, while the 10y decreased at the similar quantum to 4.02% along with the falling UST yields. The MYR closed 0.09% WoW firmer at 4.45/USD amid the softening of the greenback. The 30y MGS Re-opening auction, which was priced at average yield of 4.676%, received strong BTC of 2.56x, higher than the BTC of 2.37x recorded in the similar auction last year in Jun-16. BNM expected to maintain the OPR at 3.0% despite the higher inflation of 3.2% in Jan. GG and infrastructure/utilities names dominated trading activities in the corporate market. Primary market picked-up with total issuance of MYR5.4bn during the week, mainly from GovCo and BPAM.

Corporate News – Mixed results from the banking sector – HLFG’s net profit jumped 28% to MYR1.25bnin 1HFY6/17; Flattish FY16 result for Maybank; AMMB’s net profit declined 3.3% in YTD 3QFY3/17.  

¨      APAC USD Credit Market: UST tightened across the curve last week due to the weak tone from the FOMC minutes that failed to reinforce the hawkish Fed speak over the past few weeks. 2y note slipped 5bps WoW to 1.14%, while the 10y bond yield fell to 2.31% (-10bps WoW). IG credit spreads rose 2.1bps to 173.3bps, while the average HY bond yields continued to compress to 6.52% or its lowest levels since Nov-16. Slew of new issuances hit APAC companies, primarily from the Chinese space as total issuances for the week hit USD5.1bn.

Rating Actions - Ratings of Parkson Retail Group was slashed by Moody’s to B3 from B2; remained on negative outlook; &P, Fitch and Moody’s assigned first-time ratings to Vipshop Holdings Ltd, at BBB, BBB+ and Baa1 respectively; stable outlooks.

Table 1: Index Weekly Movements

Indices	24-Feb	17-Feb	Weekly Chg (bps)
iTraxx AxJ 5y IG	95.5	101.6	-6
AxJ IG Spread (bps)	173.3	171.2	2
AxJ HY (%)	6.52	6.56	-4
SOR 2y (%)	1.57	1.61	-4
SOR 5y (%)	2.12	2.16	-4
Malaysia 5y CDS	107.5	115.6	-8
MGS 3y (%)	3.32	3.36	-4
MGS 5y (%)	3.69	3.70	-1
MGS 7y (%)	3.88	3.90	-2
MGS 10y (%)	4.02	4.06	-4
AAA 5y Spread* (bps)	62	66	-4
AAA 10y Spread* (bps)	65	61	4
AA 5y Spread* (bps)	100	104	-4
AA 10y Spread* (bps)	104	100	3

Source: Bloomberg, BNM, RHBFIC        *MYR-denominated bonds

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