FW: RHB FIC Credit Markets Weekly - 16/10/17

 

 

 

 

16 October 2017

 

 

Credit Markets Weekly

 

Fed Minutes Highlights Divergent View; GII 20y Gets BTC of 2.15x

 

SUMMARY:

¨      MYR Credit Market: EM Asian currencies rallied last week, propelled by waning USD strength as the MYR gained +0.36% WoW to 4.222/USD, and furthermore supported by the gains in Brent oil prices and the upward surprise in the Aug IP print. Benchmark govvies yield ended mixed, the 3y gained +2bps WoW to 3.40%, while the 10y edge -1bp lower to 3.89%. Secondary market also mixed; govvies trade remains quiet, corporate activity resumed; primary market grind to a halt with a mere MYR474m issued during the week.

¨      Corporate News – Mudajaya was awarded a MYR1.16bn LRT3 project by Prasarana Malaysia Berhad to construct Package GS01 with an estimated construction period of 39 months. Including this latest job win, Mudajaya's outstanding orderbook stands at MYR3.5bn, which translates to a cover ratio of 4.6x on FY16 revenue. Mudajaya 1/19 was last traded at 6.22%.

¨       APAC USD Credit Market: Fed minutes and UST auction led bond rally. The release of the Fed minutes saw consternation by Fed members on the low level of inflation though the minutes still showed Fed members with the opinion that another hike this year as warranted. Additionally, the 10y and 3y auctions during the week drew increased demand for the former and a decreased demand for the latter. UST bull flattened with the 10y slipping -8.6bps WoW to 2.27% while the 2y was a tad lower (-1bp) at 1.49%. The DXY Index returned gains for the first time in 4 consecutive weeks, dipping to 93.1. Asian IG and HY markets both performed; Primaries picked up after "Golden week"; USD3.5bn WoW deals printed well above the issuance of USD610m last week.

¨      Rating Actions – Moody's upgraded Ausdrill Finance Pty Ltd to Ba3/Sta from B1/Pos, S&P also raises the company to BB-/Sta from B/Sta. Fitch upgrades Samsung Electronics Co Ltd to AA-/Sta from A+/Sta; Moody's upgrade China CITIC Bank International Ltd's outlook to Baa1/Sta from Baa1/Neg; S&P places Sunshine 100 China Holdings Ltd at CCC+/Neg resolving its placement on credit watch negative; Moody's raised the outlook of China General Nuclear Power Corporation International Limited's to A3/Sta from A3/Neg.

 

 

 

Table 1: Index Weekly Movements

Indices	13-Oct	06-Oct	Weekly Chg (bps)
iTraxx AxJ 5y IG	77.5	77.6	0
AxJ IG Spread (bps)	160.6	163	-2
AxJ HY (%)	6.59	6.65	-6
SOR 2y (%)	1.37	1.38	-1
SOR 5y (%)	1.80	1.85	-5
Malaysia 5y CDS	65.4	65.0	0
MGS 3y (%)	3.40	3.38	2
MGS 5y (%)	3.59	3.59	1
MGS 7y (%)	3.88	3.89	-2
MGS 10y (%)	3.89	3.90	-1
AAA 5y Spread* (bps)	73	73	0
AAA 10y Spread* (bps)	73	73	0
AA 5y Spread* (bps)	107	108	0
AA 10y Spread* (bps)	113	115	-2

Source: Bloomberg, BNM, RHBFIC        *MYR-denominated bonds

 

 

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