Treasuries strengthened across the curve after falling oil prices led gains. Brent oil prices slipped c.2.1% overnight to c.USD50.5 as the US and Libya continued to increase production output, reigniting concerns ahead of the OPEC meeting at the end o

3 May 2017

Credit Markets Update

                                               

BNM Issues Supplementary Notice on the FEA Rules

MYR Credit Market:

¨      Trading returned from a long weekend. The Malaysian govvies market saw MYR5.6bn change hands. Trades done were diversified, with maturities of 19s, 22s and 24s accounting for MYR639m, MYR1.18bn and MYR763m of trades respectively. The corporate space saw a weaker flow coming off a week of strong issuances. A mere MYR326m changed hands yesterday. Among the traded names, Aman ‘23s traded unchanged at 4.40% while the Maybank T1 traded 6.1bps stronger at 4.77%. Prasarana ‘26s were traded at 4.28% (-1.8bps).

¨      MGS 10-year falls below 4.00%. The MGS yield curve continued to flatten as the 5y, 7y and 10y MGS rallied -5.6bps, -3.9bps and -7.0bps each to settle at 3.62%, 3.86% and 3.98% respectively. The 10y-MGS fell below 4.00% for the first time since the November US Presidential elections. The MYR continued to rally on the back of a strong week ending at 4.3285/USD (+0.28%) yesterday.

¨      On a policy front, BNM introduced a Supplementary Notice on the FEA rules, furthering the hedging flexibilities available to institutional and corporates in addition to amendments to the definitions of the original rules. In economic news the M3 grew 4.5% YoY in March, while loan growth grew to 6.0% YoY.

APAC USD Credit Market:

¨      Treasuries strengthened across the curve after falling oil prices led gains. Brent oil prices slipped c.2.1% overnight to c.USD50.5 as the US and Libya continued to increase production output, reigniting concerns ahead of the OPEC meeting at the end of the month. Benchmark 2y and 10y UST declined 1.6 to 3.8bps to 1.26% and 2.28% respectively.

¨      In Asia, the iTraxx AxJ IG index was largely unchanged at 92.9bps (-0.2bps). The best performers were Samsung Electronics Co Ltd, PETMK and China Development Bank.

¨      Turning to rating action, Moody’s assigned first-time Baa3 rating to Orient Securities Company Limited to reflect the company’s stable and experienced management and improved liquidity profile. It increased its long-term liabilities from 30%, to 42% of its total assets. The leverage reduced to 4.3x in 2016 (4.7x in 2015). Elsewhere, Moody’s downgraded Standard Chartered Bank (HK)’s LT rating from Aa3 to A1, following the downgrade of the parent’s ratings. This action is to reflect that the bank’s declining profitability due to lower net interest margins, its return on average assets was 0.79% in 2016 (0.89% in 2015, 0.96% in 2014).

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