28 August 2017
Credit Markets Weekly
Heavy APAC Rating Actions; Malaysia FX Reserve Breach USD100bn
SUMMARY:
¨ MYR Credit Market: Govvies rallied post-forex reserve. The MGS curve shifted downward with the 3y declining 5bps WoW to 3.35%, while 10y fell 4bps WoW to 3.93% on the back of better-than-expected Malaysia forex reserves improving by USD1bn to USD100.4bn as a 15-Aug, from USD99.4bn as at end-Jul. CPI print for July moderated to 3.2% YoY compared to expectations of 3.4% YoY. The MYR strengthened to 4.2723/USD (+0.39% WoW) on the back of softer greenback amid geopolitical tensions and the disappointing US economic data.
Corporate News – RAM assigns final rating of AA1 to Northern Gateway Infrastructure Sdn Bhd (Northern Gateway)'s proposed MYR340m MTN programme; MARC affirmed Lebuhraya Duke Fasa 3 Sdn Bhd at AA-is/Sta; RAM affirms Batu Kawan's rating at AA1/Sta.
¨ APAC USD Credit Market: Jackson Hole Symposium dominated the week. The Jackson Hole Economic Symposium led market sentiment as investors positioned ahead of the major speeches by major central bankers. Unfortunately, the speech by Fed Chair Yellen failed to add colour to the policy direction and views of the US Fed. The UST 2y yields rose +3.0bps WoW to 1.33% while the 10y yields rallied -2.8bps WoW to 2.17%. The USD gave back as the DXY Index fell -0.74% WoW to 92.74 and the ADSY rose +0.44% WoW to 107.65; Asian CDS levels grind to new lows; Primaries picked up to USD4.0bn despite positioning ahead of the Jackson Hole Symposium.
Rating Actions – CAR Inc ratings were slashed by S&P to BB/Sta from BB+/Neg; S&P revised Beijing Automotive Group Co Ltd down to A-/Neg; West China Cement Ltd was upgraded by Fitch to BB-/Sta; Moody's upgrades Gajah Tunggal to B2/Sta from Caa1/Sta; S&P revised Weichai Power Co Ltd to BBB/Sta.
Table 1: Index Weekly Movements
Indices | 25-Aug | 18-Aug | Weekly Chg (bps) |
iTraxx AxJ 5y IG | 79.1 | 83.2 | -4 |
AxJ IG Spread (bps) | 170.4 | 172.3 | -2 |
AxJ HY (%) | 6.70 | 6.71 | -1 |
SOR 2y (%) | 1.39 | 1.29 | 10 |
SOR 5y (%) | 1.81 | 1.73 | 8 |
Malaysia 5y CDS | 73.3 | 79.6 | -6 |
MGS 3y (%) | 3.35 | 3.40 | -4 |
MGS 5y (%) | 3.56 | 3.57 | 0 |
MGS 7y (%) | 3.87 | 3.89 | -2 |
MGS 10y (%) | 3.93 | 3.98 | -4 |
AAA 5y Spread* (bps) | 70 | 71 | -2 |
AAA 10y Spread* (bps) | 70 | 68 | 2 |
AA 5y Spread* (bps) | 109 | 106 | 2 |
AA 10y Spread* (bps) | 111 | 104 | 7 |
Source: Bloomberg, BNM, RHBFIC *MYR-denominated bonds
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