FW: Credit Market Watch: Summary for week ending 17-Nov

 

 

Credit Market Watch: Summary for week ending 17-Nov

·         MYR Credit:

Ø  After previous week’s selloff, MGS yields retraced 3-8bps lower along the 5y10y WoW, held steady by the strong domestic 3Q17 GDP print. Ultra-long end 15y, however, remained a laggard up 1bp WoW. The strong economic print also drove the Ringgit to strengthen further with USDMYR pair now trading around 4.15/16. Corporate bond yields, meanwhile, mostly rose 1-3bps WoW in continued light trading (MYR1.7b volume vs MYR1.6b previous week).

Ø  3Q17 GDP: Malaysia GDP growth accelerated for a 5th straight quarter to 6.2% YoY in 3Q17 (2Q17: 5.8%) with expansion seen on all sides. On top of resilient private expenditure, government spending picked up with consumption growing at 4.2% (2Q17: 3.3%) and investments growing at 4.1% (2Q17: -5.0%). Firm net external demand also led current account surplus to widen to MYR12.5b/3.7% of GDP in 3Q17. With YTD growth at 5.9%, our economic research raised 2017 GDP growth forecast to 5.8% (previously 5.5%) and is now looking at 5.3% for 2018 (previously 5.1%).

Ø  Relative value: Celcom Networks continued to trade wider than our fitted AA1/AA+ curve largely reflecting its negative rating outlook amid still challenging operating conditions in the industry.

·         Asian Credit:

Ø  UST curve flattened further with the 2y10y spread narrowing by 12bps WoW as 2y yield rose 7bps while 10y yield dropped 5bps. The failure of Angela Merkel to form a new government put market on a somewhat vigilant mode with sovereign yields broadly lower in the Eurozone and the UST curve flatten up to the 30y point.

Ø  Asian credits spreads were overall marginally narrower, with JACI composite -1bp and JACI IG -2bps but JACI HY widened by 3bps WoW. Sovereign names generally performed well on a slight tightening bias, with CHINA curve flattening by 3-7bps, KOREA yield movements mixed, INDON and PHILIP curves about 2-5bps lower while MALAYS yields generally 4-10bps lower WoW.

Ø  Rating change: India’s sovereign rating was upgraded by Moody’s to Baa2 from Baa3, citing expectation of progress on economic and institutional reforms which will increase its growth potential and contribute to the government’s debt burden in the medium term. The agency notes that key reforms introduced recently include efforts to reduce corruption, GST, measures to address NPL in the banking system, formation of a Monetary Policy Committee while there are planned measures on land and labour market reforms.

·         CDS: EM Asia 5y CDS spreads tightened in most countries led by Korea -6bps, followed by Indonesia -5bps, Philippines -2bps, China and Thailand -1bp each while Malaysia was flat WoW.

 

 

 

---

This message is intended only for the use of the person to whom it is expressly addressed and for the purpose of the subject of this email and may contain information that is confidential and legally privileged. If you are not the intended recipient, you are hereby notified that any use, reliance on, reference to, review, disclosure or copying of the message and the information it contains for any purpose is prohibited. If you have received this message in error, please notify the sender by reply e-mail of the misdelivery and delete all its contents.
Opinions, conclusions and other information in this message that do not relate to the official business of Malayan Banking Berhad shall be understood as neither given nor endorsed by it.