MGS 7y saw BTC of 2.88x; Treasuries on the Rise Ahead of NFP Print

7 July 2017

Credit Markets Update

                                               

MGS 7y saw BTC of 2.88x; Treasuries on the Rise Ahead of NFP Print

MYR Credit Market:

¨      New 7y MGS 09/24 auction came in strong. The 7y MGS auction was well supported with a BTC of 2.88x. The average yield of the reopening was at 3.92%, -2bps lower than the benchmark yield the day before. The MGS curve continued to rally especially in the 3y and 5y MGS where yields fell -1.4bps and -1.2bps to 3.37% and 3.69%, whereas the 10y MGS remained largely unchanged at 3.97%. With the falls of equities, currencies in EM Asia also weakened. The MYR moved sideways to 4.2995/USD (-0.06%). The recent falls in the long end UST should pressure the bond market lower, while the currencies expected to remain largely unmoved ahead of the US jobs data.

¨         Govvie trading weak following the 7y auction. Following the rally in the yield curve and the MYR3bn auction of the 7y MGS, trading in the govvie space was lacklustre as only MYR1.9bn trades were recorded. A large portion of trades done were centred on the newly issued MGS 09/24 where MYR915m changed hands.

¨         Trading in the corporate space recorded trades of MYR324m. Major securities traded were the FRL 21s and GENTING CAP 22s. Each saw trades amounting to MYR30m and MYR40m respectively ending the day at 4.62% (-4.1bps) and 4.70% (-4bps).

¨         Over in economic news, markets will be focused on the upcoming trade data and foreign reserves data to be announced later today. Exports are expected by consensus to grow to 23.4% YoY after faltering slightly to 20.6% YoY the month before.

APAC USD Credit Market:

¨         Treasuries yields on the rise on prospects of hawkish global central bank policy. This was reflected particularly at the longer end as the 10y and 30y rose 4-5.5bps to 2.37% and 2.90% respectively, led by the ECB minutes which revealed that members were open to pare back the bond-buying programme, while the weaker-than-expected ADP print at 158k (consensus: 188k; prior: 253k) kept the shorter-dated 2y at 1.39% (-0.8bp), ahead of the release of the key US employment print later tonight.

¨         Asian credits continued tighten. The iTraxx was quoted slightly wider at 88.1bp driven by yet again by Korean credits i.e. Samsung Electronics (+6bp) and Hyundai Motor Co (+4.5bp). Since North Korea’s intercontinental ballistic missiles (ICBM) test this week, South Korea’s Sovereign CDS rose +6.6bps. Moody’s affirmed the South Korean sovereign rating at AA2 premised on i) high degree of economic resilience; ii) fiscal discipline and moderate government debt; iii) robust institutions and iv) low external vulnerabilities. IG credit spread narrowed 3bps to 167.7bp, while non-IG bond yields ended 1bp lower at 6.66%.

¨         Commonwealth Bank of Australia (Aa3/AA-/AA-) priced USD1.5bn 30y bond at T+103bp against initial guidance at T+120bp, its first issuance since the Australian banking sector was downgraded by S&P and Moody’s. Longfor Properties (Baa3/BBB-/BBB-) taps the primary markets with USD450m 5y bond, with price guidance set at T+210bp compared to IPT at T+235.

This message is intended only for the use of the person(s) to whom it is addressed and may contain information that is privileged or otherwise protected from disclosure. If you are not the intended recipient you are hereby notified that any use, review, disclosure or copying of this message and the information it contains is prohibited. If you receive the message in error, please notify the sender by reply e-mail and discard all its contents.   Thank You.