FW: Credit Market Watch: Summary for week ending 20-Oct

 

 

Credit Market Watch: Summary for week ending 20-Oct

·         MYR Credit:

Ø  In MGS, yields moved rangebound in the holiday shortened week amid subdued liquidity, with the 5y yield up 2bps and 10y yield up 1bp WoW. Corporate bonds softened a tad with yields higher by 1-3bps WoW as the underlying tone remain cautious. Traded volume totalled MYR3.8b.

Ø  PR1MA: Printed 5y and 7y government-guaranteed IMTN at 4.08%/MGS+49 and 4.34%/MGS+46 respectively and in sizes of MYR0.75b and MYR1.75b raising a total of MYR2.5b. The use of proceeds is to fund the development of public housing projects.

Ø  Econs: Headline inflation was higher in September at 4.3% YoY vs 3.7% in August, attributed to higher fuel and F&B costs. Nonetheless, core inflation remained steady at 2.4% (Aug: 2.4%). Adjusting for higher crude oil price assumption, our economic research expects full-year to inflation to be around 4.0%, the upper end of their initial forecast range (3.5%-4.0%). We continue to see little reason for BNM to change its monetary policy stance given stable core inflation, improving external reserves which rose USD0.2b in the first two weeks of October to USD101.4b and stable unemployment rate (3.4% in August).

Ø  Relative value: QSP papers still offer good pickup, last seen ≥25bps wide from our fitted AA3/AA- curve. Credit wise, solar power plants has less construction and operational risks compared to coal/gas power plants, although is susceptible to weather conditions. DSCR levels are decent at a projected 1.48x minimum and 1.70x on average under the more conservative P99 scenario.

·         Asian Credit:

Ø  UST curve bear-steepened along the 2y10y with 10y yield up 11bps WoW, more than reversing prior week's gain. A combination of Trump's tax deal gaining some traction and John Taylor's, a perceived hawk, was speculated to be one of the preferred candidates to replace Fed Chair Yellen had prompted a selloff in UST while the USD strengthened against most regional currencies.

Ø  Asian credits generally traded weaker although spreads were slightly tighter with JACI composite -3bps, JACI IG -2bps and JACI HY -6bps WoW. Regional USD sovereign curves were sold higher by about 3-8bps for INDONS, 2-7bps for PHILIP, 5-10bps for MALAYS and 1-4bps for KOREA WoW.

Ø  China: Moderation in residential property prices continued as NBS data showed that new home prices rose in 44/70 cities on a MoM basis in September compared to 46/70 in August, 9 cities were flat while 17 cities showed deceases. Tier-1 cities continued to underperform, with Beijing -0.1% and Guangzhou -0.5% while Shanghai and Shenzhen flat MoM. For the 70 cities, on average, home prices still grew at a modest 0.2% MoM rate (Aug: 0.2% MoM).

·         CDS: EM Asia 5y CDS spreads remained stable, with China and Indonesia -3bps each, Malaysia and Philippines -2bps each, Thailand -1bp while Korea +1bp WoW.

 

Thank you.

 

 

Regards,