FW: Credit Market Watch: Summary for week ending 27-July

 

 

Dear all,

 

Credit Market Watch: Summary for week ending 27-Jul

• MYR Credit:

• MGS traded rangebound with yields little changed WoW and the 10y MGS yield flat at 4.08%. Amid stable government bonds, corporate bonds continued to strengthen as yields tightened 1-2bps WoW across credit curves and there was improved interest in extending duration. Another active week with volume amounting to MYR2.7b (previous week: MYR3b).
• Rating changes: RAM raised its outlook on the retail sector to stable from negative on the back of new government policies and improved consumer sentiment. Post-GE14, the MIER consumer sentiment index surged to 132.9 in 2Q18 after having languished below 100 since 3Q14. While consumer spending is expected to normalize after SST implementation, overall tax burden on consumers should be lighter. Government policies deemed positive for retail include targeted fuel subsidy, medical subsidy and higher minimum wage amongst others.
• Econs: Index of leading economic indicators which declined by -0.7% YoY in May (Apr: +1.4%) points to further slowdown in GDP growth in 2Q18 and 3Q18 as the former leads the latter by 2-3 months. This is not surprising as our economic research team had earlier expected some moderation in the domestic economy for 2H18. We do not think this will cause BNM to cut interest rates anytime soon as growth is still expected to reach about 5% this year and hence, we expect OPR to stay unchanged at 3.25% for the rest of 2018.
• Relative value: AA1-rated Sarawak Energy 2031 and 2032 traded around 5.08% and 5.18% respectively, which is 5-7bps above our fitted AA1/AA+ and has value relative to longer tenor TRIplc Medical 2033 and 2034 which dealt around 5.00% and 5.11% respectively.

• Asian Credit:

• The UST curve shifted higher and flatter with the 2y10y slope 2bps lower at 28bps. 10y yield rose 6bps to 2.95% while 2y yield rose more by 8bps to 2.67% WoW. This upcoming week is event-filled. Key economic data to be released in the US include June’s PCE core inflation on 31st July (Consensus: 2.0%), FOMC rate decision on 2nd August Asian time (almost zero probability for a hike in July but is ~81% priced in for September) and July’s labour market data on 3rd August (Consensus: +193K for nonfarm payrolls and +2.7% YoY for average hourly earnings). Meanwhile, the BoJ will meet this week to decide on policy rate (Consensus: Unchanged at -0.10%) and its 10y JGB yield target (Consensus: Unchanged at zero percent).
• In Asian USD credit, primary activity continued to pick up pace with USD5.8b of bond supply last week, up from USD3.6b the week before thanks to increased issuances from Chinese names such as Beijing Capital Grand (USD400m 3y FRN), Greenland (USD300m tap of 2021 bond), China Fortune Land (USD200m 3y bond), Sino-Ocean (USD700m 3y FRN) and Sunac China (USD400m 2y bond). Contributing to the issuance stats also include Temasek’s USD1.35b 10y bonds.
• Aided by the return of risk appetite, spreads grinded tighter led by high-yield names with JACY HY spread -39bps while JACI composite -14bps and JACI IG -8bps on a WoW basis. On regional sovereigns, the tone was overall flat to slightly weaker as higher UST yields offset some tightening of spreads. CHINA and KOREA underperformed with yields rising by 8-15bps WoW while INDON, MALAYS and PHILIP saw mixed performance overall with a modest upward adjustment in yields WoW.

• CDS: EM Asia 5y CDS spreads were tighter led by Malaysia -11bps, followed by Indonesia -10bps, China -7bps, Philippines -6bps while Korea and Thailand were unchanged WoW.

 

Click link below for report:
Credit Market Watch: Summary for week ending 27-Jul

Regards,

 

Winson Phoon, ACA

(65) 6231 5831

winsonphoon@maybank-ke.com.sg

 

Se Tho Mun Yi

(603) 2074 7606

munyi.st@maybank-ib.com

 

---

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.