APAC USD Credit Market: The UST yields traded lower by 2-9bps WoW on the back of the risk-off sentiment, sparked by political turmoil as President Trump pressured former FBI head Comey to end an investigation. Concerns over the US administration, the volatility in US equities and the rout in Brazilian equities amid the political turmoil also drove investors into demanding for safe haven asset, pushing the UST

22 May 2017

Credit Markets Weekly

Indonesian Sovereign Receive IG Status from S&P

SUMMARY:

¨      MYR Credit Market: MYR and USDMYR continued to rally. The initial rally seen in the previous week has continued on for another week, though the momentum stopped in the end of the week. The MYR rallied as did the rest of Asian currencies, from the effects of better economic data, support in oil prices, and as concerns on the administration in the US was allayed slightly. The two latter effects had caused a risk-off sentiment in the market mid-week leading to pressures in the yields and currencies of EM Asia. The USDMYR ended the week at 4.3215/USD (+0.56% WoW). On the benchmark yields, the curve rallied especially in the long end led by a strong bid for the new MGS 10.5y benchmark issued at 3.90% and a BTC of 3.34x. MYR3bn as issued with an additional MYR1bn privately placed. The 3y MGS continued to underperform on the MGS curve with a +3bps drop to 3.29% WoW while the 10y MGS continued to rally -2bps to 3.92% WoW.

Corporate News – Primaries led by a large issuance of CIMB. Over the week, CIMB Bank issued a total of MYR3bn of bonds in three AAA-rated tranches with maturities of 5y, 7y and 10y respectively. The CIMB 05/22s were issued at 4.40%, whereas the CIMB 05/24s and CIMB 05/27s at 4.60% and 4.70%. The issuance pipeline is expected to continue as there are announcements that DanaInfra and other GG issuers are expected to tap the bond market soon.

¨      APAC USD Credit Market: The UST yields traded lower by 2-9bps WoW on the back of the risk-off sentiment, sparked by political turmoil as President Trump pressured former FBI head Comey to end an investigation. Concerns over the US administration, the volatility in US equities and the rout in Brazilian equities amid the political turmoil also drove investors into demanding for safe haven asset, pushing the UST yields lower WoW. 2y and 10y UST declined to 1.27% and 2.23% respectively; DXY Index tumbled to 97.14 (-2.13% WoW). Broad base widening across Asian credit markets. IG credit markets widened 4.3bps WoW to 176.4bps, while average non-IG bond yields inched 1bp higher to 6.57%; there was a total of USD9.8bn issued during the week, pushing the YTD issuances up to USD134bn.

Rating Actions – S&P upgraded Indonesia’s sovereign rating from BB+ to BBB-; Indonesian sovereign-linked companies were being upgraded by S&P following the sovereign upgrade; S&P downgraded KWG Property’s rating from BB- to B+; S&P also lowered Yuexiu Property’s rating from BBB- to BB+.

Table 1: Index Weekly Movements

Indices	19-May	12-May	Weekly Chg (bps)
iTraxx AxJ 5y IG	92.5	88.7	4
AxJ IG Spread (bps)	176.4	172.1	4
AxJ HY (%)	6.57	6.56	1
SOR 2y (%)	1.38	1.43	-5
SOR 5y (%)	1.87	1.94	-6
Malaysia 5y CDS	104.7	102.6	2
MGS 3y (%)	3.29	3.26	3
MGS 5y (%)	3.55	3.57	-2
MGS 7y (%)	3.80	3.86	-6
MGS 10y (%)	3.92	3.94	-2
AAA 5y Spread* (bps)	74	74	0
AAA 10y Spread* (bps)	80	74	5
AA 5y Spread* (bps)	111	111	0
AA 10y Spread* (bps)	115	108	6

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

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