FW: RHB FIC Credit Markets Weekly - 18/12/17

 

 

 

18 December 2017

Credit Markets Weekly

US Fed December Hike as Expected; 15-year GII 06/33 Printed BTC 1.78x. All Eyes on Nov CPI and Foreign Reserves This Week

SUMMARY:

¨      MYR Credit Market: The MYR was well supported, ended at 4.0795/USD last Friday, gaining +0.2% on WoW versus the USD. Sustained signs of domestic growth as well as positive vibes from recent upward growth revision by World Bank seen infusing renewed sentiments for the local currency. Benchmark 3y MGS seen trading on range bound mode, hovering at 3.40% as per last Friday’s closing, whilst the 5y MGS ended at 3.61%, inching 1-2 bps on a WoW basis. The 10y benchmark meanwhile saw levels closing 1-2 bps higher to end at 3.95% level. In the GII segment, 10-year traded unchanged, hovering at 4.30%.

¨      We opine the better FX outlook for MYR may continue to provide some level of support for MYR govvies although investors may embark on a more defensive stance ahead of looming Fed normalisation cycle going into next year. Vis-à-vis the 10-year benchmark MGS, we opine the 10-year GII remains compelling from a valuation perspective given the wide spread of circa 30 bps. Stronger demand for the 10-year benchmark GII on the back of tactical value hunting may potentially see spreads narrowing back to 12-15 bps from current levels. The Fed raised its benchmark interest rate last week as widely anticipated whilst revising its growth projections more upbeat for both 2017 and 2018 respectively. US policymakers revised the growth forecast for the US economy to 2.5% for both years, 2017 and 2018 versus previous projections of 2.4% and 2.1% previously. On the monetary policy front, latest dot plot showed the US Fed retaining its 3 times increase in key policy rate for 2018.

¨      Corporate News –  RAM assigns AA3/Sta to Maybank Islamic Berhad’s proposed Islamic Additional Tier-1 (AT-1) Capital Securities Programme; RAM affirms AAA/Sta rating of Citibank Berhad; RAM affirms AA3/Sta rating of Bank Islam Malaysia Berhad

¨      APAC USD Credit Market:  USTs ended the week mixed following a series of economic events and data where market participants turned mostly cautious throughout the week. As expected, the Fed hikes its benchmark rate for the final time this year from 1.25% to 1.50%. Both ECB and BoE left rates unchanged though have hinted for possible rate adjustments and may reassess its current policy in the coming year.

¨      Rating Actions - Moody’s has downgraded Yanlord Land (HK) Co. Ltd. to Ba3 from Ba2; Central China Real Estate Ltd to B1 from Ba3; Country Garden Holdings Co. Ltd to Ba2 from Ba1; Modern Land China Co. Ltd to B3 from B2; all carrying a stable outlook; Moody’s has upgraded Anton Oilfield Services Group/HK to Ba3/Sta from Caa1/Pos; Fitch has assigned BBB-/Sta ratings on Asciano Ltd; Fitch has also assigned a BBB+ on Shanghai Commercial Bank (SCB); Fitch has assigned A-/Sta on Wuhan State-Owned Asset Management (WSAM); Fitch has assigned a final rating of BBB/Sta to Inner-Mongolia High-Grade Highway Construction (IMHCD); Moody’s has assigned B1/Sta rating on Guirenniao Co. Ltd.

Table 1: Index Weekly Movements

Indices	15-Dec	08-Dec	Weekly Chg (bps)
iTraxx AxJ 5y IG	70.2	73.0	-3
AxJ IG Spread (bps)	N/A	162	N/A
AxJ HY (%)	N/A	6.72	N/A
SOR 2y (%)	1.51	1.54	-3
SOR 5y (%)	1.81	1.88	-6
Malaysia 5y CDS	60.9	63.4	-2
MGS 3y (%)	3.34	3.41	-7
MGS 5y (%)	3.61	3.65	-4
MGS 7y (%)	3.91	3.94	-3
MGS 10y (%)	3.97	3.96	1
AAA 5y Spread* (bps)	72	70	2
AAA 10y Spread* (bps)	74	74	0
AA 5y Spread* (bps)	101	101	1
AA 10y Spread* (bps)	107	109	-1

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

 

This message is intended only for the use of the person(s) to whom it is addressed and may contain information that is privileged or otherwise protected from disclosure. If you are not the intended recipient you are hereby notified that any use, review, disclosure or copying of this message and the information it contains is prohibited. If you receive the message in error, please notify the sender by reply e-mail and discard all its contents.   Thank You.