FW: RHB FIC Credit Markets Update - 27/9/17

 

 

27 September 2017

 

 

Credit Markets Update

                                               

RHB 10nc5 subdebt issued at 4.82%; UST traded on a softer note

 

MYR Credit Market:

¨      Focus on 15-y GII reopening. The MGS yield curve bull flattened as the 3y MGS curve picked up +1.9bps to 3.36% while the 10y MGS continued to rally to 3.86%. On the back of a strengthening USD, MYR fell against the greenback to 4.207 (-0.1%), though outperforming all the other currencies in the region. To be watched for will the final government auction for the month, the 15y GII 08/33 reopening. The announced planned issuance size is MYR3bn with an additional MYR1bn privately placed.

¨      Trading surged as govvie trading saw MYR5bn change hands. The short dated bonds accounted for MYR2.5bn of trades, while the 22s saw MYR683m of trades. MYR413m of which was on the benchmark MGS 03/22 which rallied -0.5bps to 3.54% and MYR119m in the GII 4/22 which rallied -0.6bps to 3.71%. The benchmarks 7y MGS 9/24 and 10y MGS 11/27 saw MYR497m and MYR568m trades rallying -1.9bps and -2.7bps respectively. Off benchmark GIIs also saw strong trading as the GII 10/35 and GII 07/22 each saw MYR119m and MYR103m transacted.

¨      Corporate trading also surged up to MYR1.1bn. MYR550m of it was from newly issued RHB Bank subdebt. AA2-rated papers FRL 12/17 and LDF3 08/33 each saw MYR50m traded at 5.09% (unchanged) and 3.88% (-8.6bps) respectively. BGSM 20s-24s saw a total of MYR85m change hands with spreads tightening -0.3 to -9bps. The BGSM 08/25s issued at the end of August rallied -9bps to trade at 4.83%.

¨      The primary market saw an issuance of AA3-rated 10nc5 subdebt by RHB Bank. The total issuance expected today is at a rate of 4.82%, 128bps above the benchmark 5y MGS. The issuance size is MYR750m bringing a total issuance of MYR1.25bn of its MYR5bn program.

APAC USD Credit Market:

¨      USTs weaken supported by Fed Chair. UST trading saw yields begin their weakening trend. The USTs saw yields pick up where the 2y UST rose +1.3bps to 1.44% whereas the 10y USTs rose +1.6bps to 2.24%. With large issuance of long dated bonds by Saudi Arabia announced, further pressure should be seen exerted on the long end of the curve.  The USD has continued to strengthen, with the DXY index jumping to 92.97 (+0.34%). Markets will be watching for the planned tax overhaul plan by President Trump and leaders of the Republican Party expected today, with current news suggesting corporate taxes will drop from 35% to 20%, promote capex spending, reduce for individual and encourage the onshoring of cash held out of the US.

¨      CDS levels move on China downgrades. The average Asian ex Japan IG spreads widened to 167.0bps (+1.5bps) on the bull flattening of the UST curve the day before while the average yield on HY Asian ex Japan remained largely unchanged at 6.56% (+0bps). The average IG Asia ex Japan CDS continued to widen now at 82.27 (+0.23bps). The widening of curves were well dispersed as State Bank of India, China Development Bank, and South Korea sovereign each saw CDS levels rise +2.2 to +2.5bps. The sovereigns of Indonesia and China each also saw CDS levels rise +1.5 bps and +1.2bps respectively. ICICI Bank Ltd on the other hand saw yields tighten -3.8bps whereas Industrial & Commercial Bank and GS Caltex Corp both saw tightening of -1.1 to -1.5bps in CDS levels.

 

 

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.