FW: RHB FIC Credit Markets Update - 29/9/17

 

 

29 September 2017

 

Credit Markets Update

                                               

GII 15y saw BTC of 1.73x; UST bull steepen

 

MYR Credit Market:

¨      Reopening 15y GII 08/33 auction was weaker. The 15y GII reopening saw demand fall as BTC was at 1.73x for its auctioned amount of MYR3bn with MYR1bn privately placed. This compared to 1.90x seen in a similar auction in March. The average yield of the auction was 4.579%, +6.9bps from its last trade a week before. As was expected, the spike in the USTs the day before pressured down the MGS markets in a bear steepening fashion, as the 3y MGS yields increased +3.2bps to 3.39%, whereas the 10y MGS yields rose +5.4bps to 3.94%. On the back of a still rallying USD, MYR weakened to 4.2315/USD (-0.24%), again underperforming its regional peers.

¨      In the primaries, Alliance Islamic Bank issued MYR130m of its MYR180m unrated subordinated sukuk murabahah programme. The 10nc5 sukuks were issued with a coupon of 5.50%, 191bps over the benchmark 5y MGS or 176bps over the last traded benchmark 5y GII.

¨      Govvies trading jumped as MYR4.1bn was traded. A large amount of which, close to MYR1.2bn surrounded the newly auctioned GII 08/33 where yields continued to rise to 4.61% (+3.4bps from average auctioned yield). The benchmark 7y GII 08/24 and 10y GII 07/27 saw trades of MYR240m and MYR320m respectively, and yields rise +5.7bps and +2.1bps to 4.03% and 4.11%. The benchmark 5y MGS 03/22 saw MYR390m trades ending at 3.59% (+4.8bps).

¨      Corporate trades continue to rise recording MYR893m. Secondary trading saw continued strong corporates change hands this time largely in the AA space. DANGA 27s saw MYR85m traded at 4.55% (-5.1bps). Ambank saw a total of MYR170m trades surrounding its AMBANK 22s callable 10/17 and subdebt AMBANK 23s callable 12/18 change hands at 3.71% (-8.3bps) and 4.47% (-5.6bps) respectively. The new issues of BGSM 25s were traded unchanged at 4.83%.

APAC USD Credit Market:

¨      USTs pare back losses and bull steepen. Following the spike in UST which followed through into Asian trading hours, the UST saw yields pared back losses as the UST yields retraced across tenures in a bull steepening trend. The 2y USTs rallied -2.0bps to 1.45% whereas the 10y USTs ended at 2.31% (-0.2bps). Expectations by economists following the tax reform measures support the initial findings of the Congressional Budget Office, which expects a widening of the fiscal deficit, differing from the view exerted by Treasury Secretary Steven Mnuchin that the resulting economic growth will result in the contrary. This has helped dampen the bullish sentiment following the announcement of the reform bill. The USD as seen by the DXY Index halted its rise slightly back down to 93.085 (-0.30%).

¨      Asian spreads widen in spite of spikes in UST. The average Asian ex Japan IG spreads widened +1.1bps to 165.6bps, while the yield on HY Asian ex Japan +4.0bps to 6.64%. This widening occurred in spite of the spikes in USTs.  The average IG Asia ex Japan CDS were largely unchanged rising +0.4bps to 83.2bps. Leading the widening in CDS levels were GS Caltex Corp and Petroliam Nasional Berhad which both saw spreads pick up +6.0bps and +5.8bps respectively. KT Corp, Export-Import Bank of China Ltd and Telekom Malaysia Bhd saw CDS level rise +4.0 to +4.9bps. DBS Bank Ltd subdebt and United Overseas Bank Ltd saw CDS levels fall -3.4bps and -2.8bps.

 

 

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