FW: RHB FIC Credit Markets Update - 12/1/18

 

 

 

12 January 2018

Credit Markets Update

           

MYR Advanced on Strong IP Data; Trading Volume Improved for MYR Bonds.

MYR Credit Market:

¨      MYR and MGS rallied. The MGS recouped previous day losses on the back of positive manufacturing result and decent trading activities. The 3y MGS held at 3.33% while the 10y MGS rallied -2.3bps to close the day at 3.87%. Meanwhile, longer end of the curve strengthening saw the 15y MGS and 20y MGS yields falling -2.1bps and -1.4bps respectively to settle at 4.38% for the former while the latter at 4.60%. The MYR surged past the 4.0000 level against the USD once again as it rallied to MYR3.9875/USD (+0.43%).

¨      Over in economic data, Malaysia's IP rose to 5% on the back of steady manufacturing output. The industrial production index (IPI) jumped to 5% YoY in Nov 2017, from +3.4% in October, and compared to +4.7% YoY in September. The pick-up was contributed by stronger growth in manufacturing production, but offset partly by a slowdown in electricity and mining output during the month. The acceleration in manufacturing activities was reflected in the stronger growth in the production of E&E products, in line with a pick-up in E&E exports. The latter jumped to a record high in terms of value during the month. Meanwhile, manufacturing sales inched lower to 10.9% YoY from +11% in October. As a result, factories toned down their pace of hiring.

¨      Govvies remained healthy as volume recorded at MYR2.9bn. Trades continued to focus on benchmark securities, especially at the belly to the longer end of the curve, accounting nearly 74% of the total trades. The benchmark 10y GII 07/27 sustained strong demand from the previous day as total transactions surged to MYR640m which saw yields rallying -4.7bps to close at 4.15%. Meanwhile, benchmark GIIs of 3y, 5y, 15y and 20y saw trade interest picking up as the GII 04/20, GII 04/22, GII 06/33 and GII 08/37 recorded trade volume of MYR233m, MYR180m, MYR140m and MYR168m respectively. Yields for the respective notes ended mixed, settling at 3.50% (-2.2bps), 3.84% (+3.9bps), 4.55% (-3.2bps) and 4.76% (+0.8bps). Benchmarks MGS also remained well demanded which saw the 7y and 10y transact volume of MYR151m and MYR190m respectively though yields firmed at 3.84% (+0.3bps) for the shorter tenure paper while the longer dated note rallied -1.6bps to 3.86%.

¨      Active secondary flows in the corporate bond space as volume surged to MYR504m. AA and GG rated papers accumulated about 65% of the total trades. PRASARANA 8/26 and 9/24 recorded total trades of MYR75m dealt at 4.45% (unchanged) and 4.34% (+2.3bps) respectively. This was followed by PUBLIC SUB NOTES 9/23 at MYR50m to close at 4.35% (+0.7bps) while AAA rated PLUS BERHAD 1/24 amounted to MYR45m dealt at 4.46% (+2.2bps). Other top trades include SPG 10/27, 10/28 and 10/32 with a combined transactions of MYR30m with yields rallying 4.97% (-3.2bps), 5.01% (-3.1bps) and 5.34% (-1.1bps).

APAC USD Credit Market:

¨      US Treasuries supported after strong US 30y bond auction. Earlier in the day saw concentration of the market on the release of minutes from ECB Dec policy meeting where the outcome revealed a possible change in policy outlook. The hawkish stance seen from most officials was partly driven by positive economic growth momentum sustained in the Eurozone. Meanwhile, China's State Administration of Foreign Exchange dismissed earlier reports where the government plans to reduce or halt UST purchases, further easing market sentiment. The USTs, led by the longer end of the curve, rallied after strong 30y note auction of USD12bn with approximately 72% of the auction taken up by indirect bidders, garnering BTC of 2.74x. The 10y UST rallied to 2.54% (-2bps) while the 30y UST saw yields plummeting to 2.87% (-3.1bps). The 2y UST, on the other hand, weakened to settle slightly higher at 1.98% (+1bp). The USD continued to slip on the back of poor economic data as the DXY fell to 91.9, closing -0.52% lower overnight.  Initial jobless claims for the month of Dec rose to 261k (consensus: 245k) from 250k. Meanwhile, PPI final demand YoY fell to 2.3% from 2.4% in the previous month, lower than initial estimates at 2.5%.

¨      Hong Kong entities led the rally in AxJ IG CDS. The iTraxx AxJ IG credit spreads fell once more to close at 59.9bps (-0.6bps). Over in CDS space saw Hong Kong players lead the tightening with PCCW-HKT Telephone Ltd rallied approximately -2.7bps while Swire Pacific Ltd shed about -1.6bps. This was followed by sovereign Thailand with spreads compressing nearly -0.5bps. Meanwhile, leading the widening for the day was Fis ICICI Bank Ltd. with CDS levels rising +3.3bps. This was followed by Export-Import Bank of Korea and SK Telecom Co. Ltd. as spreads increased about +3.1bps and +2.9bps respectively while GS Caltex Corp. edged +2.7bps higher in estimation. Entities from China also recorded widening in spreads, notably Fis Bank of China Ltd, Industrial & Commercial Bank of China and China Development Bank between +2.4bps and +2.7bps while CDS levels on sovereign China climbed nearly +1.6bps.

 

 

 

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