Credit
Market Watch: Summary for week ending 19-May
·
MYR
Credit:
Ø MGS rallied with
the yield curve moving 2-6bps lower WoW. The bullishness in govvies extended to
the corporate bond space as yields declined 1-2bps WoW across the board and
volume traded increased to MYR2.2b.
Ø 1Q17 GDP +5.6%:
Malaysia’s GDP expanded 5.6% YoY in 1Q17 (4Q16: 4.5%) on the back of a pick up
in domestic demand and export/import growth which accelerated to 7.7% (4Q16:
3.3%) and 9.8%/12.9% (4Q16: 1.3%/0.7%) respectively. Supply side sectors all
reported a pick up in growth as well. With firmer domestic demand growth and
subsiding macro pressure, our economic research team has raised 2017 GDP growth
forecast to 5.1% (4.4% previously).
Ø Relative value:
MACB 12/22 seem to offer value as it was last dealt at 4.35% vs similar tenor
PLUS 1/23 and Telekom 12/22 which are trading around 4.24-4.25%.
·
Asian
Credit:
Ø UST yield curve
tightened further by 2-9bps WoW amid negative US political headlines regarding
Trump’s alleged interference with FBI Comey’s investigation of Flynn and
Russia. The 10y UST yield broke below 2.20% before rebounding slightly to end
the week at 2.23% (-9bps WoW).
Ø Asian USD credits
widened with JACI composite +6bps and JACI IG and JACI HY each +4bps WoW.
Sovereign curves tightened led by INDON which lowered 5-10bps WoW while others
generally lowered 2-6bps.
Ø Rating change:
S&P has finally upgraded Indonesia’s long term sovereign rating from BB+ to
BBB-, and the rating is now aligned with that from the other two rating
agencies. S&P opines fiscal risks have lessened following effective and
realistic budgeting measures such as tax amnesty and subsidy reforms. With
better revenue collection and controlled fiscal spending, the agency expects
budget deficit to stay <2.5% and for net debt to remain moderate (<30% of
GDP). Along with the sovereign upgrade, ratings of 7 government-related
entities/corporates were raised by one notch as well.
·
CDS: EM Asia 5y CDS spreads were mostly +1-2bps wider except for Indonesia
which outperformed tightening -5bps WoW on the back of its sovereign rating
upgrade.
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