June Fed Rate Hike Unfazed by Jobs Data Miss

5 June 2017

Credit Markets Weekly

June Fed Rate Hike Unfazed by Jobs Data Miss

SUMMARY:

¨      MYR Credit Market: Rally halts on risk-off and lighter flows. Following its multiple weeks of rallies, the MYR saw some pullback, as it gave back some of its gains in the previous week, closing the week at 4.2802/USD (-0.3% WoW). On the currency front, the MYR was the worst performer among its Asian peers, though still among the top performers in the region for the year. The reduction in risk appetite over the week was led by the launch of the North Korean missile, its 12^th for the year, into Japan’s exclusive economic zone, though the resurgence of the Greek debt concerns, ECB’s future moves.

Corporate News – Alam Maritim negative watch as CDRC enters negotiation. MARC placed Alam Maritim Resources Berhad’s BBB+ sukuk rating on MARCWatch Negative premised on increased risk of missed or a distressed exchange after the company announced that the Corporate Debt Restructuring Committee (CDRC) will assist in mediating negotiations with its lenders and sukukholders. The CDRC has issued a standstill letter to Alam Maritim’s creditors, including the Sukuk trustee. Alam Maritim has 60 days from the approval letter’s date of issuance, to submit a proposed debt restructuring scheme to CDRC.

¨      APAC USD Credit Market: Treasuries bull flattened after the soft jobs report last week as the US economy added 138k jobs in May, while the closely watched wage growth figures showed average earnings grew 2.5% YoY in May, both missing estimates. As a result, the 10y UST slumped 9bps WoW to 2.16%, while the 2y slipped 1bp to 1.29%. Nevertheless, odds of a June rate hike remained firm at around 90%.

Rating Actions – Reliance Communications Limited’s (RCOM) was downgraded by Moody’s to Caa1 (from B2) and Fitch to CCC (from B+); Moody’s downgraded GCX Limited to B3 from B2; Fitch downgraded IDBI Bank’s LT rating to BB+ from BBB-; Fitch placed Baidu’s A rating on negative watch; S&P revised Fosun International’s outlook to stable from negative, affirming its rating at BB.

Table 1: Index Weekly Movements

Indices	2-Jun	26-May	Weekly Chg (bps)
iTraxx AxJ 5y IG	88.2	90.7	-2
AxJ IG Spread (bps)	175	176.4	-1
AxJ HY (%)	6.58	6.60	-2
SOR 2y (%)	1.35	1.33	2
SOR 5y (%)	1.83	1.81	2
Malaysia 5y CDS	96.2	100.2	-4
MGS 3y (%)	3.29	3.29	0
MGS 5y (%)	3.58	3.56	2
MGS 7y (%)	3.83	3.78	5
MGS 10y (%)	3.86	3.87	-1
AAA 5y Spread* (bps)	72	74	-2
AAA 10y Spread* (bps)	78	80	-1
AA 5y Spread* (bps)	109	111	-1
AA 10y Spread* (bps)	113	115	-1

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

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