FW: RHB FIC Credit Markets Update - 9/11/17

 

 

Credit Markets Update

                                               

BNM Nov MPC in Focus; ICBC Financial Leasing Issue USD950m MYR Credit Market:

¨      Govvies traded well supported ahead of BNM Nov MPC meeting today. Benchmark 3y MGS narrowed by -3.3bps closing at 3.47% while the benchmark 10y MGS remained firm at 3.98%. The MYR was mostly unchanged at 4.2292/USD ended +0.01% higher against the greenback as it continued to extend gains on the back of stronger oil price as well as possible delays to President Trump's tax reform plan. Trading volume remained subdued as participants prefer to stay on the sidelines ahead of further drivers in international news and as the market awaits the Nov MPC meeting of BNM.

¨      Govvies trading volume dropped to just under MYR1.7bn. Demand for off-benchmark MGS 03/18 remained firm as volume increased further to MYR436m closing +2.4bps higher at 2.94%. Other top traded off-benchmark securities were MGS 11/19 and MGS 03/23 which saw MYR114m at 3.31% and MYR111m at 3.90% respectively, with yields declined circa -0.9bps and -1.6bps respectively. 3y benchmark GII 04/20 remained active with trades surged to MYR230m closing +1.4bps higher at 3.50%. 15y benchmark MGS 04/33 was well traded with amount of MYR153m transacted to close -1.5bps lower at 4.57%.

¨      Corporate secondary flows volume plummeted to MYR262m. AA-rated securities were relatively well traded. BGSM 08/21, 12/22 and 08/25 recorded a total volume of MYR40m to settle at 4.58% (+1.2bps), 4.83% (-0.9bps) and 4.68% (unchanged) respectively. YTL 06/22 and 05/27 transacted a total of MYR30m settling at 4.57% (+9.6bps) and 4.88% (+13.2bps) respectively. MMC 11/20, 11/25 and 04/27 recorded trades amount of MYR18m at 4.90% (unchanged), 5.29% (+0.3bps) and 5.34% (-3.1bps) respectively. Other top traded was ISLAM 12/25 saw MYR30m changed hands at 4.60% (+4bps).

¨      In the primary segment, Alliance Bank Malaysia Berhad (BBB1-RAM) issued Pnc5 junior subordinated bonds of MYR150m under its MYR1bn additional Tier-1 capital securities programme with a coupon of 6.25%

APAC USD Credit Market:

¨      UST 10-year yield eases ahead of jobless claims release. Lacking important economic data nor speeches, the UST market was largely driven by the expectations on the Fed's next rate hike as the futures pricing suggesting an implied probability of a rate hike in Dec at 92.3%. Also keenly watched is still the progress of the tax reform bill in the Congress. The market remained subdued, despite news that the recent results of the elections in New Jersey and Virginia may signal some apprehension on the reforms planned by the current administration. The UST yield curve saw a bear steepening as the 2y UST fell +1.6bps to 1.65%, whereas the 10y UST fell +2.0bps to 2.33%. The DXY on the other hand remained largely unchanged at 94.87 (-0.05%). The upcoming initial jobless claims out later today will be closely watched as will developments of the US Presidents visit to China, the second leg of his Asian tour.

¨      IG credit spreads underperformed HY credit. The Asia ex Japan IG credit spreads widened once more +0.9bps to 162.0bps while the Asia ex Japan HY bond yields remained steady at 6.61% (unchanged) overnight. The iTraxx AxJ IG spreads widened +1.8bps to 78.42bps. Chinese names led the widening of CDS with Bank of China Ltd, Industrial & Commercial Bank of China, Export-Import Bank of China, and CNOOC Ltd which saw levels widen +2.9bps to +4.6bps.  The Indonesian sovereign also saw CDS levels spike +4.0bps.

¨      In the primary market, Export-Import Bank of Malayisa (A3/NR/A-) issued USD100m 5y FRNs at 3mL+85bps, while it also issued other USD50m 5y FRNs, ahead of its USD500m bond maturities in mid-Dec. ICBCIL Finance Co Ltd (A2/A/A) which enjoys a Keepwell agreement with ICBC Financial Leasing Co tapped the market for USD950m bonds in two (2) tranches of 5y bonds at T+115bps (v IPT of T+140bps) and 10y bonds at T+132.5bps (v IPT of T+150bps).

¨      Over in ratings, Fitch upgrades Emeco Holdings Ltd to B-/Sta from CCC/Sta. The change in the rating reflects expectations that the financial profile of the company will continue to improve on the back of recent merger with Andy's Earthmovers (Asia Pacific) and Orionstone Holdings, and its equity-funded acquisition of Force Equipment, due to be completed by end Nov. Emerco's FFO adjusted net leverage is expected to improve to 4.2x by the end of FY21 from 11.0x FY17 (8.3x when normalised for redundancy costs and cash flows from discontinued Chilean operations).

 

 

 

 

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